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July 31, 2001

SuperSOES Begins to Transform Nasdaq

By Peter Chapman

Last month's successful debut of Super- SOES made negotiation a thing of the past for traders of 3,500 Nasdaq National Market System (NNMS) securities.

SuperSOES replaces the accept/decline functionality of SelectNet messaging with automatic executions, transforming the inter-dealer market into an order-driven agency marketplace.

Order-Driven Market

Another 1,500 stocks in the Nasdaq SmallCap Market are under consideration for SuperSOES trading as well, according to Nasdaq. The new trading regime, which eliminates dealer-to-dealer interaction, is the latest of many rule and systems changes since the mid-90s. These changes are reshaping Nasdaq trading.

"Nasdaq has gone from a purely quote-driven market to one with a mixture of quotes and orders [on ECNs] to a purely order-driven market," said Jim Toes, a director of Nasdaq trading at Merrill Lynch.

Before SuperSOES, a market maker quote was considered an invitation to trade. A dealer didn't have to disclose his entire trading interest. "Now, I'm no longer quoting $10, for example," said Toes. "I'm telling Nasdaq I am willing to pay $10 for a certain amount of shares."