Nasdaq, NYSE Looking to Trade Each Other’s Stocks

The battle of the two largest U.S. stock markets is intensifying as the New York Stock Exchange and Nasdaq take aim at each other’s crown jewels.

The NYSE, the world’s largest equities market, is reportedly eyeing ways to trade Nasdaq stocks, possibly by partnering with an electronic trading network.

That might allow the NYSE to grab a share of the sizzling volume and profit from booming trading in technology stocks such as Microsoft Corp. and Intel Corp.

Meanwhile Nasdaq, the nation’s second-largest market for stocks, has made it plain that it wants rules lifted that limit its access to the NYSE’s top stocks.

And both the NYSE and Nasdaq have made overtures to international exchanges, as the two race to capitalize on rapidly globalizing markets and confront the possibility of round-the-clock stock trading.

The NYSE, in what could be a shift in the way it has done business since 1792, has had talks about forging alliances with at least two companies that oversee private trading networks.

The world’s largest stock market has talked with Brass Utility, which runs the Brut electronic trading system, and with Bloomberg Tradebook, an affiliate of Bloomberg.

NYSE Chairman and Chief Executive Richard Grasso said Friday that it is considering several ways to boost volume on the exchange, including trading Nasdaq Stock Market issues. One option, he said, is to incorporate an electronic trading network, in which orders are matched and paired off electronically, into the NYSE auction system, in which a market maker executes trades.

“We have been looking at different strategies to try and embrace a changing customer environment,” Grasso said in an interview with Bloomberg Television. “The world is changing. Technology becomes an enabling tool to permit us to do things differently, and that’s what we’re evaluating.”

The talks are aimed partly at capturing the growing pool of trading that occurs electronically. Electronic communications networks, known as ECNs, handled about 28% of all Nasdaq trades in 1998, up from 24% in 1997.

Forming an alliance with an electronic network would allow the NYSE to begin trading the Nasdaq’s most active issues such as Microsoft and Intel. But NASD Chairman and CEO Frank Zarb said that if the NYSE pursues the trading of Nasdaq stocks, “We are up to the challenge.”