The Nasdaq Stock Market, in partnership with a group of German banks and brokerage firms, plans to launch an all-electronic, SuperMontage-driven German stock exchange. Dubbed Nasdaq Deutschland and scheduled to go live in January 2003, the exchange will be targeted at German-retail investors who want access to a low-cost, best-execution trading platform.
An official at Nasdaq's booth at the SIA show referred questions about Nasdaq Deutschland to the market's corporate headquarters. A corporate spokesperson says that Nasdaq Deutschland will have a diverse ownership comprised of Nasdaq, Dresdner Bank, comdirect bank, Commerzbank and a pair of regional stock exchanges in Berlin and Bremen.
Jim Weber, chief operating officer of Nasdaq Europe, says that Nasdaq Deutschland will be driven by a customized version of SuperMontage - an advance order-display and execution network Nasdaq plans to launch in the United States at the end of July. The Nasdaq Deutschland version of SuperMontage, he says, will be directly interfaced into the infrastructure of Nasdaq's German bank, brokerage and exchange partners. "We're linking (SuperMontage) directly to the historical, backbone order-routing structures of the German market," says Weber. "So this market will be based on German rules and regulations, but with the Nasdaq-trading rule book and listing rules plugged into that German-exchange infrastructure."
By combining the SuperMontage-market model with the existing German-exchange structure, he says, Nasdaq Deutschland will attempt to "deliver a low-cost, focused, competitive model" that provides an appealing, new alternative for German retail investors.
John Hilley, chairman and chief executive officer of Nasdaq International, says the Nasdaq Deutschland version of SuperMontage will offer German-retail investors something completely new: a hybrid platform that combines a "market-making model with a voluntary limit-order book." Via SuperMontage, he says, German-retail investors will, for the first time, be able to get access to the same prices viewed by large institutional-investment firms. "We hope that by bringing SuperMontage there, we will be able to empower the German-retail customer through this market model that will offer best execution," says Hilley.
Nasdaq also believes that Nasdaq Deutschland will have an excellent opportunity for immediate growth, due to the lack of retail investors in Germany, and in Europe overall. "About 50 percent of Americans own equities, and in Europe that number is closer to 15 percent," Hilley says. "So we want to try to replicate the success we have had in the United States ... and to hurry (retail investors') participation in the (European) equity markets."
Weber says that one other way in which Nasdaq Deutschland will try to separate itself from competitors is by offering executions based on prices from a variety of markets. "For German securities, prices will be based on the best price between Xetra, (the trading system) for the Frankfurt market, and Nasdaq Deutschland. For U.S. securities, we will use Nasdaq and Nasdaq Deutschland (prices)," he says. "That will allow us to offer superior pricing structures to the German-retail investor ... (and) put them on a level playing field with professional institutional investors worldwide."