Abstract
SuperMontage, the new order/ quote entry and execution environment of NASDAQ, has been in the eye of a storm ever since NASDAQ announced its plan to launch the new trading platform. Much has been published about the features of the new system and how it will affect the ECNs. This white paper gives a brief overview of how the stock markets have evolved in the US from an investor’s perspective and existing trading platform used in NASDAQ. It also compares the SuperMontage with the existing systems.

Over the years, the trading models adopted by the exchanges/ OTC markets in the US have not changed drastically, though efforts have been made to leverage the advances in technology to the fullest. Forced by a stiff competition from ECNs and declining market share, NASDAQ has announced its plan to rollout the SuperMontage. This system will transform NASDAQ from a regulator/ quote collector to a competitive market place.

SuperMontage has many new features like auto-execution, multiple price-point entry, and flexible matching criteria. But it also changes the business model of NASDAQ from a regulator to a mammoth ECN itself. SuperMontage promises to consolidate the liquidity in OTC markets into a single trading system, thereby providing investors with “mother of all markets”, to route their trades to. However the competition between ECNs and NASDAQ will take its toll on liquidity and trading volatility before clear winners emerge. Investors who want to see lowest market impact cost and trading cost may not have easy times ahead as they are left with finding out the right avenue with maximum liquidity each time they decide to trade. Thus launch of SuperMontage adds an interesting new twist to the fast changing world of stock trading in the US and coming months could witness a pitched battle between the ECNs and NASDAQ over the stock trading business.

Author Mandar Joshi

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