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Nasdaq Will Have to Stick to Just Running an Exchange (And Whatever Else It's Doing to Make Three-Quarters of Its Money)

If you had hoped to do some high-frequency trading directly at the Nasdaq, we have some unfortunate news.
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If you had hoped to do some high-frequency trading directly at the Nasdaq, we have some unfortunate news.

The Securities and Exchange Commission in a filing dated Friday ruled against a months-long effort by Nasdaq OMX to roll out a suite of algorithms designed to strategically trade stocks, a business typically handled by brokerage firms.

The SEC was not impressed by whatever Nasdaq said to counter fears that its offering

Nasdaq would enjoy unfair advantages over similar services sold by brokers because exchanges enjoy some legal protections from liability under U.S. securities law. If a Nasdaq OMX algorithm went awry, a group of broker-dealers warned, Nasdaq OMX could be shielded from having to cover losses because of exchanges’ legal protections.

Given the way things have been going for Nasdaq and its fellow exchanges, those legal protections could well have become necessary. But with the business of running exchanges proving too difficult, we understand why Nasdaq thought it might be a good idea to try doing something else.

SEC Blocks Nasdaq Plan to Offer Trading Algorithms [WSJ MarketBeat blog]

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