Test of New Direct-Trade System Set to Begin Friday
A long-delayed new stock trading system that allows large institutions to trade directly--and anonymously--with each other is slated to be rolled out Friday on the Pacific Exchange, though only one stock will be involved at first, system architects said.
OptiMark, the electronic trading system developed by OptiMark Technologies Inc. in conjunction with the Pacific, has been delayed for months as its developers continued to test the system with about 100 pension and mutual funds. The Pacific, based in San Francisco, has a trading floor in downtown Los Angeles.
The system is attractive to big investors because the promised anonymity would allow them to buy or sell large blocks of stock without concern that news of a transaction will be leaked into the market and cause prices to move before the trade closes.
“It will be a soft launch on Friday,” said Procter Lippincott, spokesman for Durango, Colo.-based OptiMark. “We want to bring this up slowly.”
Initially, the system will only offer trading in one stock, 3M Corp., the industrial and consumer products giant that closed down $1.69 a share at $74.19 in New York Stock Exchange trading Wednesday. It was unclear why that stock was chosen, except that it is highly liquid, Lippincott said. Other stocks will be added in the coming weeks, depending on how well things go with the launch, he said.
OptiMark is being closely watched by some of the nation’s largest stock exchanges and traders nationwide. OptiMark Technologies has already reached agreements to eventually provide its trading system to the Nasdaq Stock Market and Japan’s Osaka Securities Exchange.
On Wednesday, OptiMark also received its long-awaited approval from the Securities and Exchange Commission to plug into the Intermarket Trading System, which links all U.S. stock markets.
The New York Stock Exchange had initially opposed OptiMark’s attempts to link to the Intermarket system, saying the Pacific Exchange and OptiMark are trying to use it for competitive advantage. But the SEC approved a compromise plan.
“They blessed the compromise we worked out with the NYSE and some of the other markets,” said Dale Carlson, spokesman for the Pacific. “We will be up and running on Friday.”
