Island, the second-largest ECN, has decided not to post it Nasdaq quotes in the National Association of Securities Dealers' Alternative Display Facility. However, despite choosing not to participate in the ADF, Island still has not committed to displaying its prices in SuperMontage -- the Nasdaq-driven order-display and execution network that is now scheduled for an Oct. 14 launch.
"We have not made a final decision with regard to SuperMontage. We continue to explore other (quoting) options, which include a relationship with the Cincinnati Stock Exchange," says an Island spokesperson, noting that the ECN now prints the majority of its trades at Cincinnati -- a regional, all-electronic stock market.
Island, the spokesperson concedes, must post its Nasdaq prices in a Securities and Exchange Commission-approved quote collection and display facility by Oct. 14. But Island is unhappy with Nasdaq, in part because of a fee restructuring -- implemented by the stock market earlier this year -- that charges more money to Nasdaq participants that submit a large number of quote updates. Island, says the spokesperson, will not post on SuperMontage unless it can forge an "economically sensible" fee arrangement with Nasdaq.
Interestingly, Instinet, Island's former rival, has decided to post its Nasdaq quotes in the ADF. Since Island and Instinet are in the midst of trying to finalize a merger they formed earlier this year, the fact that the ECNs would choose different venues for posting their Nasdaq quotes seems curious. Instinet and Island expect to complete their merger before the end of this year, and they eventually expect to integrate their ECN matching engines. If and when that scenario unfolds, Instinet/Island will have one order book, displaying all of their prices, and one execution mechanism. So the fact that Instinet has voted in favor of ADF while Island has decided to shun the facility -- at least initially -- comes as a surprise.
The Island spokesperson says that the ECNs are simply following the proper regulatory guidelines, which state that Instinet and Island must conduct their business as "two separate companies" before the merger is complete. The merger, he says, is moving forward as planned.