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Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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July 5, 2006

OTC Traders Get a Data Service of Their Own

By Peter Chapman

Also in this article

  • OTC Traders Get a Data Service of Their Own

The hour-and-a-half before the over-the-counter market opens is a busy time for dealers. They're trading. They're quoting. They're preparing for what is typically the busiest trading period of the day. Until recently, though, market makers of Bulletin Board and Pink Sheets stocks didn't have a market data service that gathered and presented this pre-opening activity in a conveniently accessible format. That made gauging how a stock might trade at the opening a cumbersome process. OTC market makers report their pre-opening trades to Nasdaq, but Nasdaq does not disseminate any of that data. Bloomberg and others do, but on an individual stock basis and at

a not insubstantial cost.

Pre-opening share volume in OTC securities now accounts for about five percent of an average day's activity. So getting a handle on where the market is going to open has become increasingly important.

A Newcomer

Now, a relative newcomer to the institutional market data world is claiming a breakthrough in the collection and display of pre-opening OTC trade data.

MicrocapTrade, a small market data vendor headquartered in Canada, has added a feature to its data and information service that paints a picture of the early morning activity in the approximately 5,000 OTC securities.

The vendor now publishes last sale data price and volume on every trade that occurs in Bulletin Board and Pink Sheet stocks between 8:00 a.m. and 9:30 a.m. as soon as they are reported.

In addition, it displays cumulative balances of all shares traded and the number of trades done during this unofficial pre-opening period. The intention is to give market makers a complete picture of the state of the market before it opens.

"This is information that is extremely important to the market maker," says Spencer Olsen, president of MicrocapTrade. "It was out there, but no one was picking it up."

Olsen, an ex-trader whose career was spent with a number of major wholesalers over 35 years, joined MicrocapTrade as president two years ago.

At the time, the firm was selling subscriptions to an OTC market data service strictly to individuals, or daytraders.

Using that service as a starting point, Olsen created the professional product that he now markets to OTC dealers and hedge funds.

MicrocapFeed Pro, as it is called, competes with the likes of Bloomberg and Reuters, but is one of the few specifically designed for the over-the-counter market.

The service has been available for just over a year and is in use by 100 individuals at 18 firms. Firms pay between $250 and $300 per month per user.

The Core Product

By contrast, the firm's core product, MicrocapFeed Individual, is used by about 1,000 traders, according to Olsen. They pay less between $99 and $139 per month.

The price is a big plus, according to the market makers with which Traders Magazine spoke. Bloomberg, for example, sells for up to $1,700 per month per user.

Among the pros signed on to the service are some of the largest dealers of OTC names. UBS, Jefferies, E*Trade, Pershing and TD Waterhouse are all customers.