MCI, Nasdaq Ink Deal to Boost Capacity

In the latest flexing of technological muscle in the financial arena, MCI Communications Corp. signed a $600-million contract with the Nasdaq Stock Market that will enable the market to handle four times as many shares traded.

MCI, the nation’s second-largest long-distance company, and Nasdaq, the No. 2 U.S. stock market, announced Thursday the signing of a six-year agreement to replace Nasdaq’s existing electronic trading network, also designed by MCI.

The contract for the telecommunications network is MCI’s largest ever with a commercial entity. The all-electronic Nasdaq and MCI, both based in Washington, have similar origins as scrappy upstarts that grew rapidly by challenging the business establishment in their domains.

Stock exchanges are hustling to expand their trading capacity as the long-running bull market continues. The recent rise in stock trading over the Internet also was a factor, said Frank Zarb, chairman, CEO and president of the National Assn. of Securities Dealers, which operates the Nasdaq market.

“We’re taking a fairly important step into the next millennium,” Zarb told a news conference.

MCI Chairman Bert Roberts, appearing with Zarb to announce the contract, said the new system will “carry the Nasdaq Stock Market into the next century.”

The contract will enable Nasdaq to eventually increase its capacity to 8 billion shares a day, up sharply from its current daily capacity of 1.5 billion and daily trading average of 647 million shares. The 8 billion goal, expected to be reached in 18 months, would dwarf the record trading level of Oct. 28--the day after Blue Monday’s plunge--when a buying frenzy pushed volume to 1.3 billion shares.

Arthur Levitt Jr., chairman of the Securities and Exchange Commission, recently warned securities industry leaders that the U.S. market must be prepared to handle daily volume of 4 billion to 6 billion shares in the near future.

MCI shares rose 69 cents to close at $43.38 on Nasdaq.