Nasdaq launches Optimark trading system
NEW YORK, Oct 11 (Reuters) - The Nasdaq, the No. 1 U.S.
electronic stock market, on Monday launched Optimark, a
so-called "black box" system that allows traders to anonymously
carry out large stock orders typically placed by institutional
investors.
The system, run by Jersey City, N.J.-based Optimark
Technologies Inc., started trading 10 stocks, including Dell
Computer <DELL.O> and Starbucks Corp. <SBUX.O>.
Ten stocks are slated to trade on the Optimark system
during a two-week trial period before expanding to include all
the stocks in the Nasdaq 100 index, which includes software
maker Microsoft Corp. <MSFT.O> and computer chip manufacturer
Intel Corp. <INTC.O>. By the end of the year, the system is
scheduled to trade in 250 of the most active Nasdaq-listed
securities.
Up to now, Nasdaq has been unable to process trades
anonymously through it own systems, though some market-makers
and alternative trading systems who deal in Nasdaq-listed
stocks offer to conceal the identity of their clients.
The anonymity is likely to appeal to institutional
investors, corporations that often trade large blocks of
stocks and bonds, but don't want to reveal their positions in
certain stocks.
Also, once word spreads that a stake holder is looking to
unload a hefty position in a stock, buyers can exploit that to
secure a lower price.
To avoid that, large investors such as securities firms and
mutual fund companies, usually sell a large chunk of stock by
parceling it out through smaller orders.
The idea is that because it can guarantee anonymity,
Optimark's system will encourage more participants and improve
pricing for investors trying to buy or sell large chunks of
stocks.
Though it matches stock orders, Optimark is not an
alternative trading system that competes with Nasdaq in the way
the so-called electronic communications networks (ECNs) do.
ECNs, computer systems that also match buy and sell orders
placed by brokers, can operate independently of Nasdaq.
In contrast, Optimark's system is embedded in Nasdaq's
stock-trading system, a spokesman for the company said.
Also, Optimark's system is a "call market," meaning it
waits fives minutes until it can build up a sufficient amount
of orders before matching them.
ECNs operate in continuous market, which seeks to match
trades the second brokers punch them into their computers.
Optimark is backed by investors such as Japanese software
company and Internet investor Softbank Corp <9984.T>, leading
U.S. Goldman Sachs <GS.N> and Merrill Lynch Corp. <MER.N>, the
No. 1 U.S. securities brokerage firm.
REUTERS
Rtr 15:02 10-11-99 |
