Nasdaq to expand Primex trading to 1,400

New York: The Nasdaq Stock Market (www.nasdaq.com) has announced that on 1 April 2002 it will begin the second phase of the rollout of the Primex Auction System, its new hybrid auction-dealer market, by expanding the list of securities eligible to trade on Primex to more than 1,400.

Included in the new list will be the top 1,000 Nasdaq-listed securities, based on market capitalisation, and all components of the Standard and Poor's 500 Index. Primex will also offer trading in three popular exchange traded funds (ETFs): the Nasdaq-100 Trust Series, the SPDR Trust Series, and the Diamonds Trust Series, proxies respectively for the Nasdaq-100 Index, the S&P 500 Index, and the Dow Jones Industrial Average.

The expanded list will be phased in during the first two weeks of April and will remain in place through 30 June 2002, when Nasdaq intends to expand trading again. Currently, Primex offers trading in all components of the Nasdaq-100, the S&P 100 and the DJIA. Trading in the system consistently exceeds more than 5 million shares daily.

"As Nasdaq adds additional securities, more brokers and dealers will be able to experience the benefits of the system's exposure process, which creates opportunities for increased participant interaction and for better prices," says Nasdaq Transaction Services executive vice-president Dean Furbush.

On the first trading day in April, Nasdaq will make available all securities included in the S&P 500. Two weeks later, on 15 April, trading will expand to the top 1,000 Nasdaq-listed securities, based on market capitalisation and the three ETFs. The expanded Nasdaq list includes roughly all securities with a market capitalisation of more than $300 million.

Primex provides an easy way for Nasdaq market 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, who 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 and offer (NBBO).

In order to speed the auction process, participants in the crowd typically predefine their responses using the system's unique predefined relative indication (PRI) tool. These responses reside in the system undisclosed. As orders are exposed in the system, PRIs immediately and automatically respond to them, enabling instantaneous executions with opportunities for price improvement.

Market makers who 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.

So far, more than 60 broker or dealers have registered as Primex Auction System participants.