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June 30, 2002


By Gregory Bresiger

Also in this article

A History of the Market That Changed the World

by Mark Ingebretsen

(Prime Publishing, Roseville, California, 334 pages) $27.50.

reviewed by Gregory Bresiger

This is a disappointing, but still useful book. It is a simple, basic, abbreviated history of Nasdaq. It is a good introduction for those who want to know about the beginnings of a trading institution that has been the focus of many controversies.

Still, for longtime professional traders there is little new or surprising here. However, the book, which is probably better suited for the investor with little or no knowledge of Nasdaq's roots than for a financial professional with years of experience of using Nasdaq's trading platform, has two good points:

It provides a thumbnail history of Nasdaq and it concludes by going into some of the controversies of Nasdaq's battles with ECNs and Nasdaq's coming privatization. The latter, I believe, the professional trader will find somewhat interesting.


The author, a longtime business journalist, in the penultimate chapter discusses the controversies as well as the contradictions of Nasdaq's privatization. Privatization, which has been sold by Nasdaq officials as a wonderful idea, could easily blow up in the faces of the investors who buy into the idea, Ingebretsen warns.

"Once unhinged from the NASD, Nasdaq from a regulatory standpoint would become just one among many exchanges and ECNs or just one more route investors might choose when directing their trades," he writes (page 282).

Nevertheless, many of Nasdaq's would be competitors complain that this transformed institution - even after it becomes a for-profit exchange - will retain many of the powers of its previous role as a quasi-regulator. The author intimates that this could be a deliberate strategy of Nasdaq officials. He cites this public statement as possible proof.

"We expect this new [Nasdaq] structure," he quotes Nasdaq's Frank Zarb as testifying before Congress, "will allow us to build a consensus for offering, in one place, the transparent price discovery needed by the market to address a continually increasing trend toward market fragmentation that creates a market structure that combines the best elements of a deal-based and aggregate display market" (page 282).

In other words, the author concludes, Nasdaq wants to be a player, competing with others in the trading marketplace, at the same time that it expects to remain the central switching facility for all trades. This is the kind of comment that many ECN officials have been making for months as they have criticized Nasdaq's proposed new trading platform, SuperMontage, which could become the ultimate ECN.

The Critics

An example of this is offered by Doug Atkin, the former Instinet president and chief executive officer. In comments that could have just as easily been made by dozens of other officials in the trading industry, Atkin complains that, "Nasdaq continues in many ways to put its interests above those of investors, especially in regard to the concerns of mutual funds, pension funds, consumer groups and others who urged that the order matching priorities of SuperMontage itself be amended in a way that is more fair to investors" (page 291).