Om Malik

From Traders Magazine, March 1999 issue

Lured by the benefits of using digital technology instead of paper for publishing its stock quotes and obviously eyeing more subscribers the National Quotation Bureau’s (NQB) Pink Sheets are being automated.

Beginning next month, the 3,000 companies traded on the Pink Sheets a subset of the non-Nasdaq over-the-counter market will have their share prices disseminated in real-time on traders’ computer screens.

NQB Chairman Cromwell Coulson said overall spending for the new system is $1 million. Random Walk in New York is building the technology backbone.

The upgrade, however, does not turn the Pink Sheets into a type of lower-tier Nasdaq.

Aside from real-time trade data, including the quantity of shares available and market makers’ telephone numbers, orders must still be negotiated between two market makers haggling on the telephone. The automated Pink Sheets will not have electronic order delivery and execution similar to Nasdaq.

From Trader’s Magazine, October 1998 issue

Nasdaq will learn next year just how well an Internet-based market-making trading system performs.

Several Nasdaq trading desks are among the guinea pigs for a pilot program aimed at testing the reliability and security of the Internet-based successor to Nasdaq’s Level II workstation. And the results of the pilot will be watched with anticipation, if not bated breath.

“The Internet is going to be the highway of the markets of the future,” said Gregor Bailar, chief information officer of the National Association of Securities Dealers, Nasdaq’s parent.

“We see it as an enabler and a catalyst, which helps create a more liquid and a more efficient market,” he added.

Nasdaq declined to identify the participants in the pilot, though it said market makers and others will be involved. “It is limited to a small group,” a spokesman for Nasdaq said. “Our goal is to

From Sept 1998 issue of Traders Magazine

Ten years ago, Automated Securities Clearance was a small but pushy software company that competed for order-management business with TCAM Systems.

How times have changed. Weehawken, N.J.-based Automated is no longer an upstart, peddling its core BRASS system and order-routing services.

BRASS now overshadows the rival product of TCAM, the New York affiliate of Waltham, Mass.-based Stratus Computers, and upstages the products of other vendors.

These include Londons Royalblue Group, Trinitech Systems in Stanford and New Yorks QV Trading Systems. Moreover, BRASS handles a majority of the order flow on Nasdaq desks.

But the question remains: Can BRASS, the industry standard, stay on top in a business with hostile competitors?

Bygone Days

BRASS and its competitors have their origin in a bygone era. Years ago, Nasdaq traders used paper pads to track their changing positions, profitability and average costs.

On a busy day,

Huge mainframes. Fiber-optic networks. State-of-the-art telecommunication systems. Worldwide market news delivered real-time.

Sound familiar? It should. These and more are at the very heart of a Nasdaq trading room.

Back in the pioneer days, much of what is today’s Nasdaq trading-room technology did not exist. By contrast, some of today’s technology has a pedestrian aura.

The consequences of that might be viewed as a mixed blessing desks have no choice but to collectively spend billions of dollars to remain competitive, but in return they transact business at an exponential rate.

Now Nasdaq, an electronic marketplace, is grappling with technology changes as never before.

Electronic communications networks (ECNs), such as Reuters Holding’s Instinet, New York-based Investment Technology Group’s POSIT equity matching system and an upstart crossing network, MatchPoint, developed by The AutEx Group and State Street in Boston, are helping to raise the stakes.

Never known for avoiding a challenge, the

From Traders Magazine, June 1998 issue

As STRIKE, the name on the hottest new electronic communications network (ECN) simply suggests, Bear, Stearns & Co. is planning for war – a price war.

STRIKE, the ECN sponsored by Bear Stearns, is going live this summer backed by some of the New York-based firm’s Wall Street peers. And millions of dollars and potential profitability are at stake.

Arthur Pachecho, Bear Stearns’ co-head of Nasdaq trading, and president and chief executive of the firm’s affiliated STRIKE unit, said the new ECN is being marketed as an attractive alternative to Instinet and other ECNs.

Commissions

STRIKE’s best weapon may be its commission schedule. Pachecho said STRIKE will charge customers “substantially” lower commissions for executions than its competition, but declined to elaborate.

Instinet, owned by London-based Reuters Group PLC, is the largest ECN approved by the Securities and Exchange Commission under terms of the order

From Traders Magazine, April 1998 issue

Traders hate rude interruptions. A breakdown in market-data systems leads to pandemonium. A faulty telephone connection is taboo.

So it is with a certain resignation that Nasdaq market makers are bracing for another interruption, and with nary a word of protest the implementation of the Order Audit Trail System, or OATS.

On March 16, the Securities and Exchange Commission made OATS official, mandating Nasdaq desks to install the real-time electronic system for gathering and reporting more than two-dozen trade details directly to the National Association of Securities Dealers. That’s a mammoth operational challenge, as desks now have up to 90 seconds to send trade details after an order is executed.

But it wasn’t exactly a sudden surprise. Several years back, OATS was a foregone conclusion. The NASD agreed to implement OATS as part of its settlement with the SEC in 1996.

OATS places a