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June 30, 1999

OptiMark's Perception Poor On the Eve of Nasdaq Launch

By Michael L. O'Reilly

On the eve of its proposed integration into Nasdaq, the OptiMark Trading System is attracting far less volume than expected at this stage, several traders said.

According to both Nasdaq and listed traders, liquidity in OptiMark has been low despite its inclusion of more than 2,200 listed issues and 170 participating firms.

"I've heard it's not doing a lot of volume, and it's a little cumbersome," said Hedi Reynolds, head of Nasdaq trading at Morgan Keegan & Co. in Memphis. Reynolds added that although she has not used the system, she has followed its performance closely.

OptiMark - operated by Durango, Colo.-based OptiMark Technologies - was launched as a facility of the Pacific Exchange (PCX) in late January for listed trading. The system is set to be integrated on Nasdaq this fall.

Volume Figures

OptiMark has not publicly released volume figures since March 1 - two months after its launch on the PCX - when the average daily volume for the five previous trading days reached 1.45 million shares.

But according to a June 10 story in the San Francisco Chronicle quoting OptiMark co-founder William Lupien, the system is currently averaging only one million shares a day, not the two million to five million projected for it at this stage.

The story reported that the lag in volume was due to problems linking OptiMark into in-house order-processing systems used at securities firms.

Other Factors

But separately, several traders cited other factors - including the lack of liquidity and the complex entering of profiles - in the low volume on OptiMark.

"If it had the liquidity, I'm sure we would use it," said the head trader at a mid-sized Boston-based asset manager, who requested anonymity. "It's not something I've felt I've needed to do yet. I don't need to be one of the first there."

The Boston-based trader added that OptiMark needs to be made more user-friendly.

Reynolds also thinks OptiMark integration into a trading desk needs to be simplified.

"I've got six screens on my desk, not to mention all the different windows," she said. "I'm signed up, and I'll likely use it a bit. But I'm going to wait and see [with OptiMark] before I get too involved."

Despite much of the hesitancy toward using the system, there are traders looking forward to OptiMark's launch on Nasdaq.

"I think it's a godsend," said Michael Murphy, head of trading at Freemont Investment Advisors in New York. "I can't wait until they get turned on in Nasdaq. People have been throwing darts at OptiMark, but it takes time."