Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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November 1, 2003

Nasdaq Pulling Plug on Lame Primex

By Peter Chapman

Primex is on the verge of collapse. The alternative trading system for listed and Nasdaq stocks "is on the endangered list but still breathing," according to one Nasdaq official. However, Nasdaq does not intend to renew its contract with Primex at the end of this year, added the official, who declined to be named.

Launched three years ago as a vehicle for price improvement on small orders, Primex never garnered much order flow. Recently, the system was only processing about 12 million to 15 million shares per day. On day one, volume exceeded two million shares. The Primex Auction System was introduced as a facility of Nasdaq by Bernard L. Madoff Investment Securities with partners Merrill Lynch, Goldman Sachs, Citigroup and Morgan Stanley.

The system was intended to replicate in cyberspace the action on the New York Stock Exchange floor. Brokers could expose orders to a crowd of bidders competing anonymously for the execution. It was activated in the midst of the industry's switch to penny ticks. The system was designed to offer price improvement, which became increasingly difficult for dealers to obtain in the new environment.

Nasdaq was not the only market center and regulatory body approached by Madoff. The wholesaler also approached the NYSE for sponsorship. Primex also considered establishing itself as a stand-alone stock exchange.

No one answered the phone at Primex's Manhattan offices. There is speculation that Nasdaq management may have decided Primex was unwanted competition for SuperMontage. Nasdaq officials declined comment on the record.