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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]


Nasdaq To Merge Two Businesses That Probably Shouldn't Have Been Two Business To Begin With

Its dreamed-for high-frequency trading empire in ruins, Nasdaq is turning elsewhere.

Running Exchanges Is Too Hard, Exchange Chiefs Say

U.S. exchanges have become a handful to handle. It seems that all of the order types they've instituted over the years to keep customers and regulators happy may have had the opposite result. But it's not Elizabeth Warren or Bernie Sanders or some other Capitol Hill communist levying these charges. It's the exchanges themselves. And rather than doing something about the things they've done to make themselves "overly complex and opaque" at the expense of ordinary investors, they'd prefer to have Congress make them do something.

Nasdaq Officials Would Just Like To Point Out That Anyone Who Lost Money As A Result Of The Exchange's Incompetence Have Little To No Legal Recourse

Oh you can try a lawsuit but, historically speaking, it won't do shit. Nasdaq is sending a message to firms weighing lawsuits related to trading losses in Facebook's initial public offering: winning won't be easy. The exchange operator believes it is protected by its contracts with members and by its unusual legal status, which is rooted in its dual role as a regulatory body as well as a business that makes money running markets. Exchange officials in recent weeks have pointed out to analysts that Nasdaq has never been successfully sued over a trading error. "When you look at member agreements that people sign, it's quite explicit that they're bound by that accommodation policy," Robert Greifeld, Nasdaq's chief executive, said last week at a Sandler O'Neill + Partners conference, referring to legal agreements capping the exchange's payouts linked to system problems...Banks and brokers have estimated they lost hundreds of millions of dollars due to technical problems during Facebook's May 18 debut. The glitches forced Nasdaq to delay Facebook's opening, and left trades involving millions of shares unconfirmed for hours. Amid the chaos, traders were forced to guess their positions and place additional orders based on those estimates. When Nasdaq delivered the results of the trading Friday afternoon, many firms were caught off guard and scrambled to reposition. According to Greifeld, the last guy who tried to get his money back "trades on the pink sheets now" but take your best shot. Nasdaq Claims Strong Defense [WSJ] Related: UBS Not Sweating The Small Stuff