Nasdaq OMX Group said it will not be responding directly to the request for proposals to build an industry-wide trail of stock and options trade details for the Securities and Exchange Commission.
The operator of the Nasdaq Stock Market and two other exchanges said it will not submit a bid to build the consolidated audit trail, often referred to as “the C.A.T.’’ The winning bidder will be in charge of creating a system that the SEC initially estimated would cost $4 billion to construct and $2 billion a year to operate.
Instead, the company, which sells trading technology to markets around the world, is considering supporting two entities that it expects will be submitting bids, said Rich Hulit, vice president of product management and business development for the market technology business at Nasdaq OMX.
“We have spent a lot of time looking at the C.A.T. and we have decided we are not going to respond as prime” contractor, Hulit said. Instead, Nasdaq is “working with a couple other people, to support them.’’
Nasdaq did not identify the parties it is working with and declined further comment at this stage of the process.
The company also said it could reassess its position and bid directly.
“As per the public CAT website, NASDAQ OMX has indicated its interest to participate in the CAT bidding process,” according to spokesman Ryan Wells. “We continue to assess and review our capabilities to determine how best to engage in the C.A.T. process.”
Responses to a request for proposals made by an industry working group composed of national exchange operators and the Financial Industry Regulatory Authority are due June 30.
FINRA, which already maintains and operates an Order Audit Trail System that could be a precursor to the C.A.T., will submit a bid, a spokesman said Wednesday.
FINRA’s O.A.T. system keeps track of trades on the Nasdaq Stock Market, the New York Stock Exchange, NYSE Arca, NYSE MKT, BATS Exchange and the Chicago Stock Exchange. It does not keep take in details of trades on Direct Edge stock exchanges or the National Stock Exchange or options exchanges, such as the Chicago Board Options Exchange and the Boston Options Exchange.
The SEC has charged the NYSE Euronext, Nasdaq OMX Group, BATS Global Markets, Direct Edge, the National Stock Exchange, the Boston Options Exchange, the International Securities Exchange, the Chicago Board Options Exchange, the Chicago Stock Exchange and FINRA with coming up with a working plan for the system by December.
But the exchanges and FINRA can also bid to build the system. The major exchange operators and FINRA have divided the tasks of making bids and reviewing bids into separate internal teams to avoid conflicts of interest in the judging.
NYSE Euronext declined comment Wednesday on whether it would submit a bid. BATS is “still strongly considering a bid,’’ said spokesman Randy Williams, but has not made a final decision.
Google, the search giant which knows how to build and comb through huge databases of any type of information, has not announced whether it has decided to bid, either.
Google, in March, joined a list of roughly three dozen organizations that stated that they intended to bid, but did not hold them to it.
Also announcing their intents to bid are a variety of the industry’s best-known technology suppliers, including SunGard Data Systems, Cinnober Financial Technology and Tradeworx, which is already creating a real-time database of trade details on public markets for the SEC; financial information service Thomson Reuters; consultancies that include Capgemini Financial Services, Grant Thornton, Wipro, Infosys, and Sapient; and the International Business Machines Corporation, the largest provider of information systems services.
Both Nasdaq and NYSE Euronext have large businesses that sell trading, risk management and other technologies to markets around the world.
Nasdaq’s technology is used in more than 70 marketplaces in 50 developed and emerging countries into the future and is behind roughly 10 percent of the world’s securities transactions. In 2012, NYSE Euronext reported $341 million in revenue from technology services. That was down from $358 million in 2011. The figure was $159 million in 2008.
The audit trail plan is a response to the May 6, 2010, flash crash, which revealed how ill-equipped the nation’s regulators were to analyze market disruptions.
The staffs of the SEC and the Commodity Futures Trading Commission took five months to piece together details of what happened on that date to trigger a 600-point drop in the Dow Jones Industrial Average in a matter of minutes that afternoon; and, a similarly speedy bounceback.
