Tough Time to Head a Tech Exchange - Industry Trend or Event

Industry Standard, The, Feb, 2001

You think the market handed you a bad year? Try eyeing the ticker tram the inside out.

That's the view of Nasdaq President Rick Ketchum and Chairman Frank Zarb. When 2000 began, their exchange was acknowledged as the world's most powerful. And they had a to-do list to match: Spin off Nasdaq into a for-profit; public corporation. Establish a 24-hour global stock exchange. And launch a new tech platform modestly dubbed SuperMontage.

Then, well ... you know. The Nasdaq index dropped by half. Suddenly, the prospect of taking the exchange public seemed about as likely as Bill Gates naming his next kid Jackson. So, like many another techco, Nasdaq had to settle for less -- a private placement of just 40 percent of the company.

Conquering the world turned out not to be so easy, either. In May, Nasdaq announced it would create a pan-European exchange, starting with the soon-to-be-merged London and Frankfurt markets. In September the merger fell through, and Nasdaq ended the year with a scaled-back plan to open a division in London. The tech exchange had better luck with its June launch of Nasdaq Japan. Still, trading volume on the Asian exchange has been lower than anticipated. And, so far, Nasdaq Canada, which debuted in November, is just a network of terminals on the desks of some brokerages in Montreal.

Meanwhile, SuperMontage has turned into a super headache. The proposed trading interface was supposed to give investors a more fair and transparent trading environment by displaying more orders and automating trades. And -- oh, yeah - it also would give Nasdaq a shot at reclaiming some of the trading volume it's lost to electronic systems like Instinet, the Island and Archipelago. But those companies, which handle more than a third of Nasdaq trades, noticed the challenge and made sure the Securities and Exchange Commission took note, too. Nasdaq submitted its SuperMontage proposal to the SEC eight times, and saw it batted back an unlucky seven. Will no news be good news on version 8.0? Ketchum and Zarb will have to hope.

Eventually, Nasdaq is likely to achieve some version of all its initiatives. Despite the tough year, Ketchum is optimistic -- about the exchange as well as underlying market conditions. It's hard not to be positive," he says. The best predictor of the market over time is the number of 49-year-olds in the country. There will be many for the next 15 years."