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Nasdaq rolls out new trading system in US

Nicole Maestri in New York

After three years and a $100 million investment, the Nasdaq Stock Market on Monday began trading stocks in a new, upgraded system that it hopes will increase its trading volumes and win back market share from alternative share trading networks.

The No. 2 US stock market started trading five low-volume stocks in the system, called SuperMontage. While no major glitches were reported, it was hard to tell if the stocks were trading any differently than usual.

"We do have (make a market in) one stock that's on there today," said Chris Wasson, director of Nasdaq trading at Legg Mason Wood Walker Inc. But he added: "There's no volume; it's a bank stock, so it's traded literally like 2,000 shares."

Wasson said he had played around with the system, and it appeared to be working well.

Robert Mikkelsen, head of Nasdaq trading at Advest Group Inc., said his firm was having connectivity problems with SunGard Trading Systems, a unit of SunGard Data Systems Inc., which provides it with stock quote information, including quotes for one of the stocks being traded in SuperMontage. Besides that, Mikkelsen reported no major issues.

Tom King, president of the SunGard Trading Systems, said the problem was minor and was being fixed.

"It's the only thing we've run into," he said, noting that SunGard Trading has 280 customers.

"It's good they're going about this slowly," Mikkelsen said of Nasdaq's roll-out of SuperMontage. "A few kinks in the beginning is not going to concern us."

Nasdaq has touted the new system, which got final approval from the US Securities and Exchange Commission this summer, as a boon to investors.

More securities will be added over the coming weeks, with all Nasdaq-listed securities trading on SuperMontage by the end of the year, Nasdaq said in a statement.

SuperMontage allows brokers to post several quotes to buy or sell a stock, rather than just one. SuperMontage also displays how much stock is available at five price levels of quotes, rather than just the one that is now displayed, showing the best bid and offer prices.

The new system lets traders enter orders anonymously so that large buyers or sellers of a stock can hide their identities when trying to complete a trade. It will allow for automatic execution, which is expected to make trading faster.

"The new trading platform is the culmination of a commitment to provide investors with a transparent, deeper and more liquid market," Hardwick Simmons, chairman and chief executive officer of Nasdaq, said in a statement.

Its roll-out comes as electronic communications networks, or ECNs, have used quicker trading systems to wrest market share from Nasdaq. ECNs -- like Instinet Group Inc., which is majority owned by global news and information company Reuters Group Plc -- lobbied against having to post their quotes on the system on concerns that Nasdaq would gain an unfair advantage and take away business. Instinet asked for and received approval from the SEC to post its quotes on a separate system, the alternative display facility, or ADF.

The NASD, which runs the ADF, said on Monday that the ADF began accepting quotes from Instinet for the five stocks that are trading on SuperMontage. Instinet said the roll out of stocks on the ADF will mirror Nasdaq's SuperMontage roll out.

The Nasdaq is in the process of being spun off from NASD, formerly the National Association of Securities Dealers.

The true test of SuperMontage will come as more popular stocks are added to the system, traders said.

"You've got to look toward Nov. 1, once you have 100 stocks or so on the system," Wasson said. "Then you'll have a better gauge. And I think it's really going to take a month, two months of broker-dealers, ECNs, market participants using the system to gauge how well everything is working."

The five stocks now trading on SuperMontage are: WVS Financial Corp.; Willamette Valley Vineyards Inc.; Waste Industries USA Inc.; Excel Technology Inc.; and Yardville National Bancorp.

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