Nasdaq Considering Plan to Compute Single Opening Stock Prices
Washington, Jan. 9 (Bloomberg) -- The Nasdaq Stock Market,
under pressure from the Securities and Exchange Commission, is
considering a plan to calculate a single price for its stocks each
morning when it opens for trading.
The second-largest U.S. stock market, unlike the New York
Stock Exchange, doesn't have a firm opening price for its stocks.
This situation can cause volatility early in the day and lead to
imbalances between dealers' buy and sell orders, experts say.
``The main benefit (of a single price) is we'd get clear,
uniform opening prices, and we'd have a means for handling
imbalances in the opening prices,'' said James Angel, a Georgetown
University finance professor who was a Nasdaq academic fellow last
year. Angel helped develop the pricing plan and Nasdaq designated
him as its spokesman on the issue.
SEC Chairman Arthur Levitt, who has pressed Nasdaq to address
the opening-price issue, praised the plan yesterday, saying it
``moves us in the right direction.''
``It may encourage broader participation by institutions that
currently avoid opening trading,'' the SEC chairman said in a
speech at Stanford University. Some dealers already have begun
matching customers' opening orders at a single price, he said.
Levitt plans to retire in the next few weeks and this issue
likely will fall to his successor. The Nasdaq plan has been
considered by Nasdaq's quality-of-markets committee, though it has
not been voted on by the board. The proposal ultimately would need
SEC approval.
As a way to set a single opening price, Angel said Nasdaq is
considering a plan to calculate the mid-point among all bids and
offers on each stock before the market opens.
The plan also would let dealers and electronic trading
networks show whether they have an excess of buy or sell orders
before Nasdaq opens, Angel said. This change could reduce the
volatility of the market in the early hours, he said.
Real-Time Quotes
Also in Levitt's speech yesterday, the SEC chairman called
for the NYSE and Nasdaq to loosen their control of real-time stock
quotes that are sold to brokerages and vendors for public
dissemination.
The dispute over ownership of real-time stock quotes has
pitted the NYSE and Nasdaq against online brokers led by Charles
Schwab Corp. Fees for these quotes generate hundreds of millions
of dollars in annual sales for the two markets.
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