UPDATE: Nasdaq To Stop Offering Flash Order Types On Sep 1
(Adds comments from Nasdaq OMX CEO conference call, and details and background
on flash orders)
By Jacob Bunge and Kevin Kingsbury
Of DOW JONES NEWSWIRES
Nasdaq OMX Group Inc. (NDAQ) said it will stop offering flash order types on
Sept. 1 as controversy about the practice continues to build, and called on
other exchanges to follow its lead.
The Securities and Exchange Commission is considering a ban on so-called "
flash" order types, which gives some traders a look at stock orders before
they're routed out to other exchanges.
But Nasdaq OMX said in a brief statement Thursday it won't wait for the
regulator to make its move.
"We respectfully call on other markets offering similar functionality to make
the same decision," the exchange operator added.
The outcry against flash orders burst into public view last month after Sen.
Charles Schumer, D-N.Y., told the SEC in a letter he would move to limit flash
orders - which have picked up in recent months - if the commission didn't.
The flash strategy takes a stock order, after it has been checked against a
market's main order book, and "flashes" them to a select group of participants,
who have a fraction of a second to act on the order before it is routed to other
exchanges to be filled.
The practice has helped exchanges build market share, but has come under fire
from critics who allege it gives some participants an unfair advantage.
Nasdaq OMX introduced flash orders in June, around the same time rival BATS
Exchange implmented its own version of the practice.
Both cited competitive pressures from upstart cash equities platform Direct
Edge, which has used a version of flash orders to help fuel its rise to become
the third-largest U.S. stock market operator.
NYSE Euronext (NYX), which operates the New York Stock Exchange, has been a
vocal critic of flash orders, as several of its rivals have adopted some form of
the trading method and have gained market share.
While the introduction of flash orders has helped boost BATS' market share,
Nasdaq OMX hasn't seen much of an impact.
On a conference call discussing second-quarter earnings, Nasdaq OMX Chief
Executive Bob Greifeld said Thursday that volume related to flash orders "is
currently immaterial to U.S. transaction business, to Nasdaq OMX, and it will be
immaterial in the future."
Nasdaq OMX has seen its share of the U.S. cash equities market slide this
year, falling from 29% in January to 22% last month, though it has stabilized in
recent months.
The company cited the drop in business as it reported a 31% decline in second-
quarter profits Thursday.
Nasdaq OMX shares were slightly higher in midday trade at $21.76.
-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; kevin.kingsbury@
dowjones.com; and Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@
dowjones.com
(END) Dow Jones Newswires
08-06-091413ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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