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August 31, 2002

STA to SEC: Forget the ADF

By Gregory Bresiger

The Alternative Display Facility (ADF), which received the SEC's approval, is expensive and unnecessary. It should be shut down because Nasdaq's SuperMontage platform will work to improve liquidity.

That's what officials of the Security Traders Association have been saying in recent communications with the Securities and Exchange Commission. STA officials continue to argue that the SuperMontage is going to improve the marketplace because the quality of executions will be better. However, STA officials say they don't have the same confidence in the National Association of Securities Dealers' ADF.

"The STA is concerned that the addition of the ADF to the marketplace not result in a disproportionate increase in broker dealer regulatory and compliance costs," the STA wrote in a recent comment letter. "In light of the fact that the NASD also provides regulatory services to Nasdaq, the NASD needs to ensure that NASD and Nasdaq members not be subjected to duplicative, redundant, unnecessary and unwarranted regulatory activities, examinations and investigations that could be avoided by access to the other market's data."

The Competition

Nasdaq officials have contended that the ADF, which must be operating to ensure that there is competition for the SuperMontage, is superfluous and should be shut down. (For more comments on the ADF and SuperMontage see Cover Story on the new chairman of the STA).