"If our equity markets are to remain competitive in the face of low investor confidence and increasing global competition, we must remove barriers that inhibit the ability of electronic markets from effectively competing with manual, floor-based markets," the letter states.
In the joint letter, Instinet and NASDAQ outline the regulatory barriers faced by electronic marketplaces that inhibit full and fair competition in the market for exchange-listed securities. "The heart of the problem traces back to the National Market System (NMS) and its market interaction rules, both of which were designed almost three decades ago -- prior to the advent of today's sophisticated and technologically advanced marketplaces," says the letter.
Attached to the letter sent to lawmakers is a set of principles for "Advancing Investor Interests in the 21st Century." The principles offer a specific critique of regulatory barriers faced by more efficient electronic marketplaces: "Of greatest concern are certain provisions of the Intermarket Trading System (ITS Plan) governing trade-throughs...Those rules, adopted with traditional floor-based markets in mind, negate the speed and certainty of execution advantages of electronic markets, inhibiting efficient trading, stifling transparency, widening spreads and increasing transaction costs."
The principles also point out that "The SEC's own execution quality statistics reveal that the average effective and quoted spreads in the NASDAQ-100 securities are significantly lower than effective spreads in the S&P 100 exchange-listed securities."
The letter was signed by NASDAQ President and CEO Robert Griefeld and Instinet CEO Edward J. Nicoll. The full text of the "Advancing Investor Interests in the 21st Century" principles is available at: http://www.instinet.com/about/news/viewpoints/pdf/NasdaqBullets.pdf.
