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Nasdaq extends functions
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August 27, 1999: 6:41 p.m. ET
Market to offer back-office services later to support after-hours trading
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NEW YORK (CNNfn) - In response to the growing popularity of after-hours trading, Nasdaq announced Friday it will extend many of its back-office operations until 6:30 p.m. ET starting this fall.
The electronic stock market will extend hours for services such as its trade-confirmation system, the Automated Confirmation Transaction Service, or ACT, and its volume-tracking service starting Oct. 1. Many of the services now stop operating at 5:15 p.m. ACT now shuts down at 5:30 p.m.
Nasdaq also will lengthen the operating time of SelectNet, an automated system for linking orders, prices and trades between brokerages and trading platforms such as Electronic Communications Networks, for another 75 minutes. SelectNet currently stops operating at 5:15 p.m.
Nasdaq's quote system, the Nasdaq Quotation Dissemination Service, will run for another five minutes, until 6:30 p.m. And the stock market will extend its Nasdaq Trade Dissemination Service, which carries real-time price and volume data for trades submitted through ACT. As of October, that service will run to around 6:50 p.m. instead of 5:15.
Nasdaq, the market, is not yet extending its hours, though it has announced plans to do after Y2K problems are addressed. The New York Stock Exchange also plans to offer after-hours trading in 2000, with an evening session.
Both markets recommend a unified effort and cooperation with the Securities and Exchange Commission when it comes to extending hours. But many of the nine Electronic Communications Networks already offer after-hours trading.
Access to the extended trading on ECNs was once the purview of institutional clients. But online brokerages such as Datek, E*Trade and Discover Brokerage are starting to offer retail clients the chance to trade after hours, by linking to ECNs.
As a result, Nasdaq says it is extending some of its trade-tracking operations to make sure there's an orderly environment. It also will ease its own efforts to extend hours down the line.
"We are taking this step so that short of a full effort, investors and broker/dealers will know that they are operating in a regulated environment," Frank Zarb, chairman and CEO of Nasdaq's parent, the National Association of Securities Dealers Inc., said in a release.
ACT, the trade-confirmation system, currently confirms any after-hours trades completed on ECNs at 9:30 a.m. the next day. Now they will be confirmed until 6:30 p.m.
During regular market hours, if a trade placed on an ECN can't be completed within the ECN, SelectNet broadcasts the bid or offer price to the other market participants, the market makers and ECNs.
But at the moment, ECNs don't connect to each other after the close of Nasdaq trading at 4 p.m., and any after-hours trade must be executed internally. In other words, a buyer's price on Island, one of the ECNs, must match up with what a seller is looking for on Island.
One executive at an ECN credited Nasdaq's move to extend SelectNet's hours to competitive pressures. Six ECNs -- Archipelago, Bloomberg Tradebook, Instinet, Island, REDI and MarketXT -- are expecting to declare as early as Monday their intention to link their after-hours trading, to offer a greater pool of liquidity.
If those ECNs were to create their own computerized systems to link after-hours, they could circumvent SelectNet, creating their own system to do what they do on Nasdaq's system during the day.
"Nasdaq is trying to force themselves in," said the executive, who wished to remain anonymous. "The question is, are they going to be a player in the game or are they going to slow us down? If they add value and they want to do the right thing, all the ECNs are going to be happy for them to be there."
Scott Peterson, a Nasdaq spokesman, said the market is extending "these various systems to help maintain market integrity and protect investors. This creates audit-trail information, greater information and better price discovery."
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