Nasdaq Announces New Electronic Order Display Window- Revolutionary System Aggregates Pre Trade Information From All Market Participants And Displays Depth To The Marketplace

The Nasdaq Stock Market® today announced a new system for displaying electronically quotes and orders to buy and sell Nasdaq stocks. The Nasdaq Workstation II® (NWIITM) screen will be redesigned to include the new Nasdaq Order Display Facility or "Window" in order to increase transparency in The Nasdaq Stock Market. The proposal has been submitted to the Securities and Exchange Commission (SEC) for final approval. "The Nasdaq Order Display Window will reinforce Nasdaq® as the true market center for Nasdaq stocks by enhancing the collection, aggregation and display of pre-trade information from both Market Makers and Electronic Communication Networks (ECNs)," says Frank G. Zarb, Chairman and CEO of the National Association of Securities Dealers, Inc. (NASD®)-parent of The Nasdaq Stock Market, Inc. "This approach allows us to build upon the foundation strengths of Market Makers and ECNs, while providing the type of centralization called for by SEC Chairman Arthur Levitt in his recent speech." Combining the strengths of both the dealer market and an agency market on a level playing field, the Nasdaq Order Display Window preserves the ability for Market Makers to advertise quotes and provide liquidity into the Nasdaq market. At the same time, the proposed new system does not prohibit market participants from interacting with their own orders (and internalizing orders) pursuant to their customer arrangements. Moreover, Market Makers and ECNs will retain ownership of their orders displayed in the Nasdaq system and will share in revenues gained from their execution. It is an inclusive model built with the connectivity to link all types of alternative trading systems-including ECNs-into the market center. The redesigned Nasdaq Workstation II screen will have three main displays: The middle and bottom sections are equivalent to the display presently available in the current Dynamic Quote window on the NWII-with the addition of a new "size" designation. The top section-which is the new Nasdaq Order Display Window-will show the best bid/best offer in Nasdaq and two price levels away, accompanied at each price level by the aggregate size of the "displayed" trading interest of Market Makers, ECNs and Unlisted Trading Privileges (UTP) Exchanges. Nasdaq market participants will be able to display their orders anonymously at each price level in addition to their displayed quotations. Nasdaq will provide order delivery against the best prices displayed in the Nasdaq Order Display Window through an ability to access multiple sources of liquidity in an automated manner. This will provide virtually instant automatic executions against Market Maker quotes and rapid automated order delivery to ECNs. In essence, the new Nasdaq Order Display Window will aggregate all quotations and other orders at the market and one and two price levels away from the market that a Quoting Market Participant, such as a Market Maker or ECN, wishes to display on an unattributed basis. The bottom section, equivalent to the display presently available on the NWII, will offer a way for Quoting Market Participants to advertise their trading interests, which may be at the inside market or one or more ticks away. This section will be useful for market participants that wish to trade a block or large size at a price that is one or more ticks away from the market. The new Nasdaq Order Display Window will allow Nasdaq Quoting Market Participants to display additional orders, over and above their quotations, to the market anonymously, which minimizes certain risks that a market participant encounters when large size is attributable to its MMID. Anonymous interest will also be displayed in the bottom section of the NWII under a special MMID (in the schematic above the MMID is indicated as "SIZE" ). By allowing for the unattributed display of size to the market and providing a facility that complies with the SEC Order Handling Rules, the Nasdaq Order Display Facility will encourage Quoting Market Participants to show greater size, which should increase transparency and ultimately enhance liquidity in Nasdaq. Reserve size permits a Market Maker ECN to display in the new Window part of the full size of a proprietary or agency order with the remainder held in reserve to be displayed in whole or in part as the displayed part is executed. Reserve size will replenish displayed size (attributable or non-attributable) by at least 1,000 shares (or a default amount) once the displayed size is reduced to zero. Reserve size will be accessible through Nasdaq's trading platform. The inclusion of unattributed orders as well as a "reserve size" function benefits the market by allowing market participants to add significant liquidity into the Nasdaq system without having that trading interest displayed. This feature will minimize the potential market impact of displaying very large size, while enhancing liquidity, since reserve size will be accessible electronically. The Nasdaq Stock Market lists nearly 5,000 companies, has a larger dollar volume, and trades more shares per day than any other U.S. market. Nasdaq is a subsidiary of the National Association of Securities Dealers, Inc., the largest securities-industry, self-regulatory organization in the United States. For more information about Nasdaq, visit the Nasdaq Web site at www.nasdaq.com or the Nasdaq NewsroomSM at www.nasdaqnews.com.