Nasdaq Tries Again to Expand Price Access

The Nasdaq Stock Market unveiled a new stock quote display system Tuesday that is designed to improve investor access to the best prices for the 5,000 stocks listed on its computerized trading system.

The new system--Nasdaq’s second attempt at expanding stock price information, after a first proposal was withdrawn--is expected to be up and running next summer if the Securities and Exchange Commission approves it.

The system would move the U.S. stock markets another step closer to the creation of a centralized stock-quote information system, an idea SEC Chairman Arthur Levitt expressed support for in a speech last month.

The Nasdaq dealer market has faced increasing competition from a growing army of electronic stock trading systems that match buyers and sellers at potentially better prices than dealers offer.

This proliferation, however, has raised concerns that the nation’s stock markets have become too fragmented. Investors trading on one electronic network can’t be sure they’re getting the best price at that moment because the networks aren’t linked; someone could be offering a better price on another network.

Many of these upstart networks recently agreed to pursue sharing data with one another, however. Nasdaq’s proposal would be a further, and potentially major, step in this direction. The electronic networks, known as ECNs, would be asked to provide stock quotes to the new Nasdaq system on a voluntary basis.

The current Nasdaq system lists only a single best price for a specific stock. The new one would display the three best prices in any trading venue, something Nasdaq officials say will increase access to what is known as the market’s depth, or the total number of offers to buy or sell a specific stock at any one time.

That information would allow investors to make decisions based on a wider array of pricing information, which should lead to improved confidence and more trading activity, NASD President Richard Ketchum said.

“This clearly is better than the system we have now. It’s a step in the right direction,” said Bernard Madoff, head of Madoff Securities, a firm that matches buy and sell orders.

The proposal is the NASD’s second attempt to create a so-called central limit-order market. Its 1998 plan sought to set up a Nasdaq-run limit-order market that would have allowed dealers, who risk their capital to buy and sell stocks, to be bypassed completely.

That proposal was stymied by widespread opposition from dealers such as Madoff, who stood to lose business to Nasdaq itself.