SEC to Vote on Nasdaq Trading Proposal

The Securities and Exchange Commission scheduled a vote for Wednesday on a long-standing Nasdaq Stock Market proposal to centralize its trading, a move experts say is a signal the agency will probably approve the plan.

The so-called SuperMontage plan, originally proposed in October 1999, has been changed eight times by Nasdaq following criticism from Reuters Group’s Instinet Corp. and Senate Banking Committee Chairman Phil Gramm (R-Texas).

SEC Chairman Arthur Levitt, who plans to retire by mid-February, has said the proposal would increase the visibility of the best prices on the second-largest U.S. stock market.

“The fact they’ve scheduled a vote indicates they’ve resolved any concerns about the proposal and are likely to approve it,” said Ed Fleischman, an SEC commissioner from 1986 to 1992. The agency issued a notice Thursday on the meeting date.

The Nasdaq plan would have Nasdaq dealers’ screens list the three best buy and sell quotes from different trading venues, rather than just the single best order. The SuperMontage system would go into effect at the end of the year, Nasdaq officials have said.

Instinet, the largest electronic trading network, has argued that it and other networks would lose business to Nasdaq as a result of SuperMontage at a time when the second-largest U.S. stock market plans to become a private, for-profit competitor. The proposal has drawn support from many brokerages, which would continue to play a key role in matching orders.

Some mutual fund companies have given restrained support for the plan.

“While it’s probably a better system than we have today, it doesn’t go far enough,” said Gus Sauter, a managing director at the Vanguard Group, the second-largest U.S. mutual fund company. “Certain players are disadvantaged.”

Nasdaq’s proposal caps a decade-long effort by the second-largest U.S. stock market to address fragmentation of its trading among different venues. The SuperMontage plan followed a series of earlier Nasdaq plans that failed to win support.

Instinet and some other trading systems, known as electronic communications networks, or ECNs, have said that Nasdaq could use SuperMontage to expand its market share and take business away from them. These ECNs, which account for about a third of Nasdaq’s volume, automatically match buyers and sellers.