Nasdaq Market Share Drops to 16%
By Bloomberg News
NEW YORK — The Nasdaq Stock Market has stopped disclosing the volume of trades made on its own system after its market share in Nasdaq-listed companies almost halved.
Nasdaq's share of the market for trading its own listed stocks has declined to about 16 percent from 32 percent over the past two years as traders switched to electronic competitors such as Archipelago Exchange and Instinet Group amid a price war. The New York Stock Exchange (NYSE), in comparison, handles about 80 percent of trading in the stocks it lists.
The decline in Nasdaq market share on its year-old SuperMontage trading system has led to reports that Nasdaq may merge with some rivals. On Tuesday, Nasdaq Chief Executive Officer Robert Greifeld denied a Wall Street Journal report that he had approached the NYSE about a possible merger.
"The transaction business in the foreseeable future is not going to be a good business," Greifeld said in a Bloomberg News interview earlier this month.
The Nasdaq Web site now shows only data on trades in Nasdaq-listed companies reported by brokerages even if the transactions occurred elsewhere. Nasdaq, which spent about $107 million to develop the SuperMontage system, had disclosed its market share since March, when the system captured about 18 percent of trading. Greifeld, hired in May, changed the disclosure policy this month.
Trading revenue, the biggest component of Nasdaq's four businesses, plunged 42 percent in the third quarter from a year earlier as volume migrates to competing electronic systems such as Archipelago and Instinet, controlled by Reuters Group.
To attract volume from large investors, electronic trading networks typically offer rebates of $2 or more for every thousand shares customers offer to buy or sell.
Marketplaces compete for trade reporting because they sell the data and also collect fees for recording the trades.
Nasdaq said in a Securities and Exchange Commission filing earlier this month that it plans to lower prices for trading on SuperMontage beginning Jan. 2.
Competing electronic trading systems pay brokerage firms to post trade orders on their exchange, and charge fractions of a penny per share when they trade. Instinet has been increasing its market share by lowering some fees and offering free execution of trades in some stocks listed on the NYSE and American Stock Exchange. The price-cutting is eroding earnings at Instinet and its competitors, including Nasdaq, which are responding in kind to compete. |
