Amid criticism that its current trading system is unfair, the National Association of Securities Dealers in the U.S. has proposed changes to the NASDAQ stock markets, changes which the group says would provide investors with more opportunities to buy or sell stocks at prices better than market-makers’ displayed quotations.
The new system also would provide market-wide protection of investors’ limit orders.
Proposed is a fully automated system, to be called Aqcess, which would enable investors to reduce their transaction costs through improved price protection and price-improvement opportunities, Knight-Ridder reports.
Aqcess would effectively operate as a fully automated national facility to handle customer limit orders, in which customers specify the levels at which they will buy or sell stocks.
The proposal would affect investor limit orders of up to 3,000 shares that are processed through Aqcess and priced between the current quotes of NASDAQ market-makers. These would be aggregated and broadcast publicly through commercial vendors to attract matching orders. Such orders, when entered into Aqcess, would be automatically matched and executed against one another. Also, investor limit orders of up to 3,000 shares that are entered into Aqcess would be displayed over NASDAQ terminals, thereby ensuring that market-makers and order-entry firms have knowledge of such orders. Companion rules governing the operation of Aqcess would, in turn, obligate market-makers to provide limit-order protection to investor limit orders of 3,000 shares or less, whether they are in Aqcess or held by a firm. The changes come at a time when major broker-dealers on NASDAQ face charges that they are colluding to ensure that the gap between selling and buying prices remains excessively wide, and that they are making millions of dollars in the process.
The Securities and Exchange Commission (SEC) and the Justice Department have probes under way to investigate allegations of anti-competitive behavior, and a class-action lawsuit has been filed against the firms in U.S. District Court in New York.
The proposal requires SEC approval.
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