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Arizona Stock Exchange Opens Auctions to Individual Investors
By Ted Hampton
New York, Aug. 18 (Bloomberg) -- AZX Inc., which runs an online trading system called the Arizona Stock Exchange, plans to open its single-price stock auctions to individuals next week.
Clients of Track Data Corp.'s myTrack brokerage service will become the first retail investors able to send trade orders to the Arizona Stock Exchange, Track Data and AZX officials said.
Goldman Sachs Group Inc. and other investment banks this year have used AZX auctions to avoid price swings at the Nasdaq Stock Market's daily open. Trades occur at the price that fills the most orders while meeting or bettering traders' desired prices.
The pact between AZX and Track Data reflects growing concern about rebates brokers get for trades sent to market-maker firms for execution. The payments let brokers offer lower commissions but also limit incentive to seek the best terms, critics say.
``It is an extension of the original revolution to empower the retail investor,'' said Steven Wunsch, president and chief executive of AZX. ``If you carry the empowerment notion to its logical conclusion, it includes letting the client determine where the order actually goes.''
Track Data, which competes with Tradescape.com Inc. and Charles Schwab Corp.'s CyBerCorp unit for the most active U.S. individual investors, said it began letting clients specify where their trades are made within the last year.
Traders can pick market makers such as Knight Trading Group Inc., or they can funnel orders to the automated order matching systems called Redibook, Island ECN, Archipelago LLC, MarketXT Inc. and Brut ECN.
Track Data clients do about 6,500 trades a day, for $12.95 commissions. The company doesn't say how many accounts it has and claims about 129,000 have downloaded myTrack software. It charges fees from $20 to $100 a month for the various levels of real-time market data it provides.
Messaging Function
The system also features messaging functions that let investors discuss, among other things, the quality of trade executions, said Track Data marketing director Rafi Reguer.
``Very quickly, market makers get reputations as being either very good or very bad,'' he said. ``Some of the market makers do have fairly good execution and track records.''
Customers can also rely on an automatic order routing system if they don't want to specify a trading system like AZX or a firm like Knight, he added.
Online brokers that recruit less-active clients are unlikely to follow suit and let customers specify where their orders go, Reguer said.
Such brokers, he said, ``feel that they're doing people a favor'' by keeping their systems simple and are seeking to lure less experienced traders. It might also force them to rethink their dependence on payments for orders, he said.
Track Data competes with Bloomberg News parent Bloomberg LP in providing financial information to brokerage firms. Shares of the company lost 1/32 to 31/32 in Nasdaq trading.
AZX, which has offices in New York and computers in Phoenix, offers trades in 16 Nasdaq-listed stocks. In recent months, it has gotten investments from Wall Street firms including Goldman, J.P. Morgan & Co. and Credit Suisse First Boston.
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