Nasdaq began operation of the Primex Auction System on December 17, with trading in the 30 stocks of the Dow Jones Industrial Average. Nasdaq plans to add Nasdaq-100® Index stocks later this month. Nasdaq has an exclusive license to operate the Primex Auction System for all U.S. equities. This new, hybrid, auction/dealer trading system was developed by Primex Trading N.A., LLC.
"The Primex Auction System has performed up to our expectations," said Gene Lopez, Senior Vice President of The Nasdaq Stock Market, Inc., "Through last Friday, more than 100,000 trades and 28 million shares were executed in the system. More than 1 percent of the Dow 30 volume consistently traded through Primex during that same period."
Glen Shipway, CEO Primex Trading N.A., LLC, said, "We are pleased that the initial launch is proceeding as planned and that subscribers are becoming comfortable using the system. As SunGard/BRASS, Lava Trading, and Nasdaq Tools connect their customers to Primex in coming weeks, we expect trading volumes to increase further."
The Primex Auction System is a relatively simple and easy way for Nasdaq participants to access liquidity that, until now, has never been exposed to the marketplace. There are two sides to the Primex Auction. On one side are order entrants, including Market Makers, that briefly expose their orders in the system. On the other side, a crowd of electronically linked participants competes for these orders at prices at, and within, the prevailing national best bid or offer (NBBO).
To speed the auction process, participants in the crowd typically will predefine their responses using the system's unique Predefined Relative Indication (PRI) tool. These responses reside in the system undisclosed. When orders are exposed in the system, PRIs respond to them immediately.
Market Makers that enter their customer orders in the system may commit capital to those orders, in conjunction with the auction process. The system's exposure mechanism validates customers' execution prices and enhances execution quality without sacrificing speed.
Later this month, Nasdaq will expand the securities eligible to trade in the system to include stocks in the Nasdaq-100 Index. These combined lists of almost 200 securities will remain in effect through March 31, 2002, when the initial start-up phase is scheduled to end. Nasdaq has waived all fees associated with linking to, and transacting in, the Primex Auction System for the duration of the initial start-up phase.
So far, more than 60 broker/dealers have registered as Primex Auction System participants.
