Nasdaq has now completed the rollout of SuperMontage, transitioning the last of its 3,950 stocks onto its advanced order display and execution system on Dec. 2. But the jury on SuperMontage -- a platform that was designed to yield increased price transparency to investors by aggregating the five best bids and offers for every Nasdaq stock on a single screen -- is still out.
In a recent study it performed on stocks traded prior to and following the Oct. 14 launch of SuperMontage, Nasdaq found that SuperMontage stocks benefited from "higher fill rates, faster executions and greater depth and increased use of reserve." But at a securities industry roundtable hosted by SunGard on Dec. 3, SuperMontage received mixed reviews from a variety of Nasdaq participants.
UBS Executive Director Joe Sommer, one of the panelists on the roundtable, said that SuperMontage has a lot of potential, but has yet to bring significant depth to the market. "I have to say the verdict is that SuperMontage has not changed the industry yet .... The big promise of SuperMontage is that it could become a super-ECN, where you have depth of book, across multiple sources of liquidity, fully displayed. But as it stands today, most of the liquidity inside SuperMontage is top of book stuff from market makers and ECNs," said Sommer, UBS Warburg's regional head of equities and electronic execution. "It's not bringing a lot more transparency than you had if you were using other ECNs, or some of these ECN aggregation tools, such as a Lava (Trading) or (SunGard's) Universal Market Access."
What's more, he said, some of the traders on UBS Warburg's Nasdaq desk recently told him that the SuperSoes system -- the order execution predecessor to SuperMontage -- often provided more immediate executions than Nasdaq's latest technology. "Right now you may see liquidity in SuperMontage that is not immediately executable .... (because) there's a technology inside SuperMontage that freezes the (order) book and recalculates, and occasionally that can cause some glitches," said Sommer.
However, despite its "technical glitches" and lack of real depth, Sommer said that UBS still has a "lot of hope" for SuperMontage. Nasdaq, he said, could increase its depth of book if it were to make it easier for participants to "get liquidity" into SuperMontage. Specifically, Sommer said that Nasdaq should adopt the FIX messaging protocol. By allowing participants to use FIX to route orders to SuperMontage, he said, Nasdaq could potentially increase its depth. "Currently, you have to go through some proprietary protocol in order to get liquidity into SuperMontage .... (But) I'm a standards guy ... (and) I'm lobbying to see the greater use of FIX by the technology providers in the Nasdaq market space," he said.
Meanwhile, William O'Brien, senior vice president and general counsel for SunGard's Brut ECN, said that SuperMontage has thus far had a relatively positive impact on ECNs that display their prices on Nasdaq's network. In fact, recently, three ECNs -- Archipelago, Bloomberg Tradebook and Brut -- were among the top six liquidity providers in SuperMontage.
O'Brien says that unlike ECNs such as Instinet and Island -- which have decided not to display their quotes on SuperMontage -- Brut felt that it had to post its quotes on a Nasdaq system in order to provide best execution to its customers. "Our approach is that one execution solution cannot be all things to all people. You need to have a much more integrated approach, to present the best value proposition to your client," he said. "And we felt that, from an execution quality perspective, that exposing our subscriber orders on SuperMontage would produce a higher likelihood of (superior) market execution."
That said, O'Brien, like Sommer, does not think that SuperMontage has brought anything new to the table in terms of quote aggregation. "I've spent a lot of time on sell side trading desks over the past couple of months, and a lot of firms that already had (Lava Trading or UMA) did not really see there screens change with SuperMontage. They already had integrated Nasdaq and ECN information on their desktop, prior to SuperMontage," he said.
SuperMontage's customer base is now comprised of 300 market makers, six ECNs and one stock exchange. The six ECNs are Archipelago, Tradebook, Brut, Track,, Attain and NexTrade. The loan exchange participant is the Chicago Stock Exchange.