Nasdaq plans to replace markets link: report

The Nasdaq Stock Market plans to withdraw from a system that links major stock markets in the United States as part of a program to improve its technology and compete more directly against the New York Stock Exchange (NYSE), the Wall Street Journal reported Monday.

Since the 1980s, Nasdaq has been part of the Intermarket Trading System, or ITS, a set of rules that governs how various stock markets including the NYSE link to one another so that orders can travel seamlessly when being executed, according to the report.

But now, Nasdaq says it can improve its services to investors by pulling out of the ITS plan and replacing it with a private electronic linkage it obtained in its recent acquisition of Brut LLC.

Nasdaq says the changes will help investors that use its system, but it will force other markets to find out how to link to Nasdaq, a process that could take several months.

The report said that the ITS plan has been used for 25 years to make sure that various stock markets could communicate their orders to one another, helping ensure that investors got fair prices.

But with the regulatory changes from the Securities and Exchange Commission (SEC) that will go into effect next year, known as Regulation NMS, the ITS plan has come under criticism for being out-of-date and no longer needed.

Chris Concannon, executive vice president of Nasdaq, said that removing Nasdaq from the ITS plan will allow the market to improve its technology and order-routing systems without needing to go through an approval process that includes other exchanges.

He added that a private linkage will give Nasdaq better ability to handle the increasing flow of orders coming from electronic traders who use computer programs to buy and sell stocks.

The Nasdaq plans, which already have been approved by Nasdaq's board, could be announced soon and then sent to the SEC for approval, said the report.

Nasdaq envisions that the change will go into effect next year around the time that a broad set of new trading rules passed by the SEC takes effect, the report added.

Source: Xinhua