[12817]
November 1, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 57-00
RE: INSTITUTE LETTER TO SEC ON ICI/SIA TRANSPARENCY WORKING GROUP
The Institute recently sent a letter to SEC Chairman Levitt (a copy of which is attached)
regarding the joint ICI/Securities Industry Association working group formed to examine
issues relating to the transparency of limit orders in the U.S. equity markets. The letter is in
response to an earlier letter submitted by the SIA (a copy of which is attached) updating
Chairman Levitt on the progress of the Working Group and the steps taken by the Group to
formulate recommendations to increase transparency. The SIA letter focuses primarily on
Nasdaq’s SuperMontage proposal, which would establish a new order routing and execution
facility for Nasdaq traded securities, and recommends the immediate regulatory approval of
SuperMontage.
The Institute’s letter clarifies our position on transparency in general and specifically on
the SuperMontage proposal. The Institute letter states that the Working Group generally
agreed that increased transparency would add liquidity to the market and that while Nasdaq’s
SuperMontage proposal represents a good first step towards increasing transparency of limit
orders in the near term, further enhancements that would increase the number of price levels
displayed in the system, particularly after the conversion to decimalization, should be pursued.
The letter notes, however, that since the last meeting of the Working Group, certain commenters
- particularly ECNs - have brought to our members’ attention other potential problems with
SuperMontage. The letter states that in response to these concerns, Nasdaq has filed an
amendment to SuperMontage with the SEC and that in light of this action, our members felt it
best to reserve judgment on SuperMontage until we have had a chance to fully examine and
consider the revised proposal.
Ari Burstein
Associate Counsel
Attachments
Attachment no. 1 (in .pdf format)