The Nasdaq OMX Group (Nasdaq:NDAQ), the world's largest exchange company, today announced that on October 8th, 2010, it will launch Nasdaq OMX PSXsm (PSXsm), the first US equity trading platform with a price-size priority model.
The platform, which will be operated as a facility of the NASDAQ OMX PHLX exchange, has been approved by the Securities and Exchange Commission (SEC).
PSX, for the first time in U.S. market structure, will be an equity exchange model that encourages participants to display more shares at a price level. The allocation of shares is pro-rated based on a participant's size relative to the total size at that price level. More displayed volume encourages greater transparency in the public marketplace and increased depth at a price level for customers.
"In direct response to some of the market developments this year, NASDAQ OMX is excited to launch a true market structure innovation, which will provide a different trading model for customers looking for an equity exchange that rewards size and liquidity," said Eric Noll, Executive Vice President of Transaction Services at NASDAQ OMX. "We are pleased to deliver new opportunities that meet the needs of our buy-side and sell-side trading customers as well as other market participants enabling them to add liquidity to a lit marketplace," he added.
Kevin Cronin, Director of Global Equity Trading at Invesco said, "In today's markets, posted liquidity and average execution size is low and the difficulty of trading large blocks of stock has increased due to challenges that have been created by developments within the US equity market structure." Cronin added, "Institutions need a platform to encourage posting of liquidity in today's markets. The new PSX price-size model provides an innovative solution to this challenge and comes at a crucial time."
Mark Kuzminskas, Director of Equity Trading at Robeco Investment Management said, "The concept of a price-size model encourages participants to post larger orders and favors institutional traders who have a higher degree of conviction to secure greater liquidity with more efficient pricing. This is especially important in smaller cap securities."
NASDAQ OMX gives participants the ability to choose from three different market models for U.S. equities trading. PSX gives customers the ability to execute orders with price-size priority while The NASDAQ Stock Market and NASDAQ OMX BX give customers the ability to execute orders with price-time priority with different pricing and functionality. NASDAQ OMX will continue to leverage the speed and efficiency of its core INET technology across all exchanges.
NASDAQ OMX is leveraging the trading license from its 2007 acquisition of the former Philadelphia Stock Exchange, known today as NASDAQ OMX PHLX.