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10:16 AM
Robert Sales
Robert Sales
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NASD: FIX-Enabled ADF on Horizon

Responding to the requests of ECNs, the NASD is building a FIX interface to its Alternative Display.

Electronic Communications Networks desiring to communicate to the Alternative Display Facility via the Financial Information Exchange (FIX) messaging protocol may soon get their wish. The National Association of Securities Dealers, in response to requests from ECNs, is developing a tool that will make it possible for Nasdaq participants to route quotes to the ADF through FIX.

The ADF -- a Securities and Exchange-mandated quote display and printing facility that is supposed to provide an option for ECNs that don't want to show their prices on Nasdaq's SuperMontage platform -- currently receives quotes through the so-called XTP messaging protocol. XTP is a protocol used by OM, the Stockholm, Sweden-based technology provider that the NASD hired to build the ADF. Several ECNs have in the past asked the NASD to make its facility FIX-compliant, though, to date, only Instinet has publicly committed to posting its Nasdaq quotes on the ADF.

But Instinet was previously one of the ECNs that voiced the loudest complaints about the ADF's FIX deficiency. An Instinet spokesman, in a recent interview with WS&T, said the ECN expects to be connected to the ADF by Oct. 14 -- the same date that Nasdaq plans to launch SuperMontage. However, the spokesman was also concerned about the ADF's reliance on XTP -- a protocol Instinet has never used before. "There are some gaps in the ADF and it uses this obscure protocol," he said. "It's like we're having to learn how to speak Portugese. And we already speak 12 languages, but that's not one of them."

To alleviate this concern, the NASD is now building a FIX link. "We have actually recently launched an effort to build a FIX-protocol converter in front of XTP. That will be available ... after October 11," says Steven Joachim, senior vice president of market operations and information services at the NASD.

While declining to provide a more specific date for the rollout of the FIX converter, Joachim says the NASD has been offering this functionality to ECNs for months -- but was delaying its development due to a lack of participant commitment to the ADF. "We have been offering the possibility of building a FIX-translation engine for the XTP front end to the ECN and ATS community since February," he says. "We wanted them to commit to sending us a substantial portion of their Nasdaq traffic, so that we would have good business justification for building a FIX interface. But, (prior to Instinet), no one (had) committed to doing that."

The next challenge the NASD will face is getting more ECNs to commit to post their quotes on the ADF. In late August, the SEC tried to help the NASD by asking ECNs to send in letters certifying that they would post a "substantial portion" of their Nasdaq traffic on the ADF. To give ECNs time to link to the ADF, the SEC promised to delay the launch of SuperMontage to Oct. 14. But it appears that Instinet was the only ECN that sent the commission an ADF certification letter. Instinet has confirmed that it sent in the letter, but no other ECNs have stepped forward to support the ADF. A SEC spokesman confirms that the commission received at least one ADF certification, but declines to say whether it received more than one.

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