The Nasdaq Stock Market last week unveiled its new so-called Electronic Order Display Window, which will display best bids and offers and integrate SOES and SelectNet execution systems for market participants. Pending approval by the SEC, the order display window--which will be incorporated into the redesigned Nasdaq Workstation II screen--is scheduled for implementation in the summer of 2000.
The impetus behind the window's development was a response to recent market fragmentation and the less transparent market resulting from multiple trading systems such as electronic communications networks, says Richard Ketchum, president and chief operating officer of the National Association of Securities Dealers (NASD), Nasdaq's parent company.
Ketchum describes the order display window as a "market center" for all ECNs and market makers to display anonymous orders at each price level. The market makers and ECNs will retain ownership of orders and will share revenues from executions on the system with Nasdaq. "The access will be identical to all participants on an instantaneous basis," says Ketchum.
The new Nasdaq Workstation II screen will be made up of three displays, two of which will be the same as on the Dynamic Quote window currently on the system. The new Order Display Window will show best bid and offer within Nasdaq and two price levels away. Each price level will also show the size of the trading interest and participants can display anonymous orders at each price level along with their displayed quotations.
The window will include unattributed orders and reserve size functionality to show part of an order with the rest in reserve to be displayed as the orders are executed. These features are expected to add liquidity and minimize market impact, explains Ketchum.
While questions remain about the future of ECNs and alternative trading systems, Ketchum maintains that the new order display window will not drive ECNs out of business. "The world has changed, ECNs provide important roles but monitoring has become a frustration," Ketchum says. He adds that the order display window is aimed at providing the backdrop for a central quotation system that SEC chairman Arthur Levitt has been recommending. In a speech at Columbia Law School in September, Levitt detailed his call for a central system for the posting of all buy and sell orders for U.S. stocks to be displayed electronically.