DOW JONES NEWSWIRES
Nasdaq OMX Group Inc. (NDAQ) said it will stop offering flash
order types on Sept. 1 as controversy about them continues to
build, and called on other exchanges to follow its lead.
The Securities and Exchange Commission is considering a ban of
the cutting-edge electronic trading. A flash order lets some
traders have a sneak peek at market activity.
But Nasdaq said in a brief statement Thursday it doesn't have to
wait until regulator action to make its move. "We respectfully call
on other markets offering similar functionality to make the same
decision," it added.
NYSE Euronext (NYX), which operates the New York Stock Exchange,
has been a vocal critic of flash orders, as several of its rivals
have adopted some form of the trading method and have gained market
share.
The outcry against flash orders burst into public view last
month after Sen. Charles Schumer, D-N.Y., told the SEC in a letter
he would move to limit flash orders - which have picked up in
recent months - if the commission didn't. In such orders, trades
are routed through private liquidity pools before being sent onto
other exchanges for filling.
Critics have argued that having private-quote data available to
some investors - those with access to the private liquidity pools -
and not all, could increase costs. In addition, the price of an
underlying security is harmed by creating a two-tiered system of
investors where those with access get a better price than those
without.
-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354;
kevin.kingsbury@dowjones.com