Nasdaq’s SuperMontage Makes Trading Debut
After three years and an $100-million investment, the Nasdaq Stock Market on Monday began trading stocks in an upgraded system that it hopes will increase its trading volumes and win back market share from alternative share-trading networks.
The No. 2 U.S. stock market started trading five low-volume stocks in the system, which is called SuperMontage.
“It’s good to have this day.... It went just the way it was supposed to,” said Dean Furbush, Nasdaq vice president.
He said no major glitches were reported throughout the trading day.
But it was hard to tell whether the stocks were trading differently than usual because of the extremely light volume.
“It’s good they’re going about this slowly,” Robert Mikkelsen, head of Nasdaq trading at Advest Group Inc., said of the roll-out of SuperMontage. “A few kinks in the beginning is not going to concern us.”
Nasdaq has touted the system, which received final approval from the 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.
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,” said Hardwick Simmons, chairman and chief executive of Nasdaq.
Its roll-out comes as electronic communications networks, or ECNs, have used quicker trading systems to wrest market share from Nasdaq. ECNs such as Instinet Group Inc., which is majority-owned by global news and information company Reuters Group, 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, known as the alternative display facility.
NASD, which runs the alternative display system, said Monday that the system began accepting quotes from Instinet for the five stocks that are trading on SuperMontage. Instinet said the roll-out of stocks on the alternative system would mirror Nasdaq’s SuperMontage roll-out.
Nasdaq is being spun off from NASD, formerly known as the National Assn. 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,” said Chris Wasson, director of Nasdaq trading at Legg Mason Wood Walker Inc.
“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.”
Furbush said he is looking forward to getting a better picture of how the system is working when 12 more stocks are added Thursday. But he agreed that it would take a while to get the full effect of the system.
“It’s something that will play out over months,” he said.
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.