J P Morgan acquires stake in Internet-based Arizona Stock Exchange

J P Morgan acquires stake in Internet-based Arizona Stock Exchange

J P Morgan is to acquire a minority interest in the Arizona Stock Exchange (www.azx.com), an electronic call market for stocks. The US investment bank has also joined a programme to demonstrate AZX’s preopening call auction system.

The voluntary call auction programme, designed to efficiently achieve price discovery for Nasdaq stocks, is currently being conducted with 16 Nasdaq stocks. As part of the AZX call auction, firms will enter bids and offers for these stocks between 9:00 amand 9:29 am EDT, just before the Nasdaq’s daily 9:30 am opening. At 9:29 am, a clearing price will be determined that optimally executes the most volume from both the bid and offer sides of the market.

Bob Gasser, Head of J P Morgan’s US equity trading business, comments: "AZX’s preopening call auction will enable us to level the playing field for investors by offering a more transparent process for discovering opening price. Achieving price discovery with the broadest market constituency possible is an essential element to providing clients with best execution. In highly volatile markets, it is our belief that this mechanism has the potential to reduce the market impact of both institutional and retail order flow by virtue of its full disclosure of the depth of the bid and offer side of the market for any given security."

Founded in 1992, the Arizona Stock Exchange is an electronic, Internet-based system for conducting single price call auctions in equity securities. AZX’s auctions are distinguished by trading at only designated times, as opposed to the continuous trading of most other markets, and are designed to balance supply and demand at those times in a fair and open process. The principle is considered ideally suited to opening and closing markets, and for stabilising volatile markets.

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