Commentary

John D'Antona Jr.
Traders Magazine Online News

The End of an Era?

Has the day of the high-frequency trader and his hyper fast strategies seen its last days? Or will he evolve into something else and live to trade another day?

Traders Poll

Are you in favor of a pilot program and examination of the rebate system by the SEC?




Free Site Registration

July 31, 2004

Nasdaq Favors An Auto Floor

By Gregory Bresiger

Floor-based market models must automate and "migrate" to the Nasdaq model. That's what Nasdaq's general counsel has told the SEC while generally lauding efforts to change the trade-through rule by adding an opt-out provision.

"Electronic trading is best for investors. Importantly, this truth is implicit in the SEC's proposal," according to Edward Knight, Nasdaq's general counsel. The Reg NMS package of reforms is much needed, he added.

"One might ask why the government has to do this? The reason is that the business of running a floor-based auction market is currently protected from competition by a set of SEC-mandated rules," Knight wrote to the SEC.

Knight also charged that specialists are benefiting from outdated regulations. "These rules, which are relics of our past, have provided an extraordinary dividend to the intermediaries participating in these floor-based markets. The industry is eager for change," Knight said. Nasdaq, in arguing for the revision of the almost 30-year old trade-through rule, believes there is no need to extend it to its market. But it wants regulators to "open the trading of the New York Stock Exchange securities to competition by eliminating the trade-through rule. During the floor exchange's transition to a modern market, a trade-through rule may exist, but only if accompanied by a truly usable opt-out exemption," according to Nasdaq's filing.