NASD Committee to Meet to Discuss Nasdaq Volatility (Update1)
NASD Committee to Meet to Discuss Nasdaq Volatility (Update1)
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and comment from NASD in 11th to 14th paragraphs.)
New York, Jan. 8 (Bloomberg) -- Securities firms will meet
in New York Monday about ways to reduce volatility on the Nasdaq
Stock Market, part of an effort to assess a trading environment
that's featured $50 daily swings in some stocks.
The meeting, coordinated by the National Association of
Securities Dealers, will include officials from big market
makers, electronic trading networks and broker-dealers. It will
be their fifth such meeting in the last six weeks, said Patrick
Campbell, Nasdaq Stock Market executive vice president, who's
attended several of the meetings. The group may have several more
meetings, he said.
''There's a (speculative) bubble out there that's 10 times
as big as anything I've ever seen,'' said Ken Pasternak, a trader
for almost 25 years and president of No. 1 Nasdaq market maker
Knight/Trimark Group Inc., who plans to attend the session.
''Something will come out of this. I hope it's quick enough to
prevent a panic at the fire exits.''
Internet stocks have been the main cause of concern in
recent weeks. Broadcast.com Inc., which airs corporate conference
calls and other programming on the Internet, surged 65 1/2 to 197
1/2 after touching 230 today. Amazon.com, the online bookseller
fell as low as 152 and rallied as high as 199 1/8 before closing
at 160 1/4.
Pasternak said he'll propose that Nasdaq trading in a stock
be halted when large order imbalances exist in ''fast markets,''
Pasternak said. ''Every exchange has order imbalance procedures,
why shouldn't the Nasdaq?'' he said.
Stocks Get Crazy
Jeff Citron, president of Datek Online Holdings Corp., will
also attend the meeting. He said trading halts might make sense
for some customers of his company's online brokerage, though he's
''personally'' against them. ''Is it really much more volatile
trading than it's ever been? If 15 stocks get crazy, you don't
write an entire exchange's policy for 15 stocks,'' he said.
Citron doubts any regulatory changes will result from the
committee's work, though he plans to propose various means of
increasing liquidity. Electronic trading networks like Datek's
Island ECN Inc., the No. 2 off-exchange, order-matching network
after Reuters Group Plc's Instinet, should be allowed to show
''the depth of their order book'' -- meaning its entire book of
orders, sorted by price.
Showing multiple quotes means buyers or sellers in fast-
trading stocks won't need to panic and agree to a trade at the
first quote they see, said Citron.
The issues being considered by the group are different from
those addressed in a Nasdaq proposal last month to give broker-
dealers as long as 30 minutes to set quotes on initial public
offerings before trading begins.
That proposal, forwarded to the SEC Dec. 22, seeks to quell
the volatility of some IPOs by making the prices more reflective
of market supply and demand. Nasdaq's parent, the National
Association of Securities Dealers, has asked the SEC to speed
consideration of the proposal.
The industry group meeting Monday is focusing on the
volatility of more seasoned stocks, rather than IPOs, Campbell
said.
Besides Pasternak and Citron, those planning to attend are
Bernard Madoff, president of the broker-dealer firm that bears
his name and president of the Securities Industry Association's
trading committee, and E.E. ''Buzzy'' Geduld, president of market
maker Herzog, Heine Geduld Inc. The group also includes
representatives of securities firms Merrill Lynch & Co., Goldman,
Sachs & Co., and Morgan Stanley Dean Witter & Co.
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