Reuters' Instinet Faults Nasdaq `Supermontage' on Capitol Hill
Washington, May 11 (Bloomberg) -- The Nasdaq Stock Market's
proposal to centralize trading of customer orders drew fire on
Capitol Hill from Reuters Group Plc's Instinet Corp., the biggest
U.S. electronic trading network.
Instinet Chief Executive Doug Atkin said the Nasdaq proposal,
dubbed the ``supermontage,'' would give Nasdaq an unfair advantage
over competitors and ultimately harm investors.
``Supermontage really should be called supermonopoly,'' Atkin
said in testimony to the House Commerce Committee's finance
subcommittee.
The supermontage, which awaits Securities and Exchange
Commission approval, seeks to link scattered markets created by
Instinet and other low-cost electronic trading networks, which
automatically match buyers and sellers.
The proposal would have dealers' trading screens list the
three best buy and sell quotes for any stock, instead of just one,
and would list quotes from Nasdaq dealers and the electronic
networks. Dealers and investors now must search for the best
prices among the different networks.
As now designed, the supermontage, coupled with Nasdaq's
pricing conventions, would put certain electronic networks last in
line to execute orders entered through Nasdaq, when those networks
offer the best prices for investors, Atkin said. ``It would give
investors worse prices than they get today,'' he said.
Pressure on Brokers
Nasdaq, which now is owned by the National Association of
Securities Dealers, which regulates U.S. brokers, has an inherent
conflict of interest, Atkin said.
``We cannot allow one competitor to write the rules for
another competitor,'' he said. ``That's like allowing the pitcher
to determine the strike zone.'' The NASD has approved a plan to
convert Nasdaq to a for-profit company and sell the market.
NASD President Richard G. Ketchum defended the
``supermontage'' plan.
``While participation in the supermontage is voluntary,
Nasdaq is confident that its many advantages will encourage a
broad range of market participants to use the system,'' Ketchum
testified.
In April, SEC Chairman Arthur Levitt turned down a request
from House Commerce Committee Chairman Thomas Bliley to put off
consideration of the supermontage until after the Nasdaq market
fully converts to decimal pricing. Ketchum has said he expects the
SEC to approve the supermontage plan by September.
The private electronic trading companies, known as electronic
communications networks, account for about one-third of all Nasdaq
volume. The ECNs include Instinet, Datek Online Holdings Corp.'s
Island ECN, and Bloomberg Tradebook, which is owned by the parent
of Bloomberg News. |
