An Interview with Nasdaq’s Christopher Concannon
If Christopher Concannon were a linguist, then market structure would be his language. As executive vice president of transaction services for the Nasdaq stock market, Concannon is responsible for the management and operation of Nasdaq's transaction platforms, including SuperMontage, its automatic-execution system. In this role, Concannon keeps close tabs on all regulatory changes that could impact the growth of SuperMontage as it pursues listed-stock trading.
Since joining Nasdaq in May 2003 as head of strategy and business development, Concannon has been a key advisor to Nasdaq CEO Bob Greifeld and all Nasdaq heads of business lines on operational and regulatory issues. No stranger to electronic communications networks (ECNs), Concannon was previously president of Instinet Clearing Services. He also served as special counsel and senior vice president of development at Instinet, most recently coordinating and advising the company's senior management on the integration of Instinet and Island ECN.
Editor-at-Large Ivy Schmerken sat down with Concannon at Nasdaq's lower-Manhattan headquarters to discuss what's in store for the automated marketplace.
WS&T: As a result of capping the ECN access fees, what do you expect is going to happen now with SuperMontage? Will that have an impact on your market share?
Concannon: Well, that's what it's designed to do. I felt that SuperMontage was disadvantaged when it came to a broker's use of SuperMontage because of the unknown costs. And if I have an alternative that I can trade [on] and I know exactly what it costs -- as opposed to something that's random, and it's whatever I get billed at the end of the month -- I'll likely use the one that I have a defined cost to, because I can control my P&L that way. This actually clarifies the cost of trading and it clarifies the cost of trading at a very competitive cost. So the cap on ECN access-fees is just one component on SuperMontage. We have our own per-share trade-execution fee that we drastically lowered effective Jan. 1, where our fee for an execution was not against an ECN, but with the liquidity embedded in SuperMontage. You execute against SIZE or a market-maker quote. Prior to Jan. 1, we charged three mils or three tenths of a penny for taking out [hitting a market maker's bid or offer] and we paid two mils as a rebate [for posting a limit order]. As a result of our pricing change, our lowest take-out fee is now 2.5, so we have that half-a-penny capture on a trade. So we're still paying two but we're now charging 2.5, so it's .0025, which is a substantial reduction ... But we tiered it -- it's 2.5, 2.7 and three depending on your activity on SuperMontage. So it's a tiered approach to pricing, which is another form of cost reduction and delivering the SuperMontage execution at a much lower cost. And so you combine that with a cap on ECN access fees, the average cost of trading on SuperMontage is dramatically lower than it was just a month ago -- another important component to growing the liquidity on SuperMontage.
WS&T: So now Instinet is going to participate in SuperMontage as INET?
Concannon: Their goal is to integrate to a single platform first and to get everything related to that integration out of the way and make sure it's stable and then post its quotes in SuperMontage for participation in executions, but it is triggered off of that change in priority, which isn't effective until March 1. The cap on ECN fees was approved by the SEC, but we had to pick an effective date to adjust their fees and they asked us to pick the beginning of a calendar month, because that's how they bill, to give them the cap. Since it's tied to the change in priority, that's when the change in priority is as well. So it's all March 1 as the effective date.
WS&T: I understand you're bringing CAES (Computer Assisted Execution System) under SuperMontage?
Concannon: Essentially, CAES disappears and is replaced by SuperMontage, so we have SuperMontage technology supporting our Nasdaq and our listed trading. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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