26 October 2014

Nasdaq to compete with brokers in algo trading

14 May 2012  |  3725 views  |  0 Man writing graphs on glass wall

Nasdaq OMX plans to compete with US brokers in the provision of algorithmic trading software tools.

The US exchange operator has asked the Securities and Exchange Commission for permission to begin offering a new 'benchmark orders' programme to member firms. This would offer three basic algorithmic trading strategies that would channel orders at either a volume-weighted average price, time-weighted average price, or as a percenage of trading volume.

The effort will bring Nasdaq OMX into direct competition with larger US brokers that white label similar tools to smaller brokers.

Nasdaq's objective is to attract more volume back to the Exchange, counteracting the drain on volumes caused by algorithmic trading strategies that split orders among multiple alternative platforms and dark pools in the search for best execution.

Nasdaq's filing with the SEC states: "The benchmark order will permit members to achieve on an exchange via a single order type what previously has required access to multiple venues using multiple order types."

The initiative will prove cost-effective for members, the statement adds, enabling them "to manage more order flow at a single trading platform."

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