ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, January 21, 1997 TAG: 9701210096
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: ROCKVILLE, MD.
SOURCE: Associated Press
THE CHANGES ARE MEANT to keep professional traders from inflating prices.
Nasdaq stock market President Al Berkeley smiled and crossed his fingers.
That cautious optimism summed up the feelings of Nasdaq officials, regulators and traders Monday as rules aimed at improving competition on the electronic stock market began for the 50 active Nasdaq stocks.
``I think bottom line is everybody is amazed it went as successful as it did,'' Berkeley said. He spoke in Nasdaq's main data center in a suburban office park west of Washington, D.C. The market set up a ``war room'' to analyze how the nation's second-largest stock market was handling the changes.
Nearby, a team of Nasdaq attorneys hunched over telephones, fielding questions from Wall Street firms and Securities and Exchange Commission officials about the new trading rules that could save investors millions.
The rules are a landmark change for Nasdaq because they allow customers to place orders for stocks at prices better than the buy and sell prices posted by professional traders.
The changes evolved from government investigations last summer into collusion by Nasdaq dealers to fatten their profits by keeping stock price quotes artificially wide.
The SEC rules allow investors' limit orders to compete with quotes from professional dealers. With a limit order, a customer instructs a broker at what price to buy or sell shares. In the past, Nasdaq dealers were not required to disclose a customer's limit order to other dealers.
Regulators hope customer limit orders will narrow the ``spread,'' or the gap between the best offer to buy and best offer to sell a particular stock.
The change required extensive computer programming at major Wall Street firms. During the four past Saturdays, Nasdaq held practice trading sessions so firms could fine-tune their computerized trading systems and train their staff. The switch has been stressful.
``I had a very sleepless night last night going over in my head all of the hundreds of different goblins that could bite me,'' Berkeley said.
The rules didn't trigger any major system problems on the first day. Indeed, trading was busier than normal for Nasdaq, with a volume of 592.4 million shares. Earnings announcements and other corporate activity pushed the volume higher, not the onset of the new rules, officials said.
Another change is for the next 90 days, the SEC will allow Nasdaq market makers to quote prices in minimum order sizes of 100 shares in the 50 stocks, down from the current minimum of 1,000 shares. Market makers are the professional dealers at the center of the market who stand ready to trade stocks.
LENGTH: Medium: 56 linesby CNB