Nasdaq Intermarket

What Was Nasdaq Intermarket?

Nasdaq Intermarket was a system that was implemented and managed by Nasdaq to allow for networking, communication, and trading activity among those participating in several markets via electronic means.

This network utilized the Intermarket Trading System (ITS), which was an electronic network linking the trading floors of several markets, allowing real-time communication and trading between them. This ITS platform allowed any broker on the floor of one of the participating exchanges to coordinate an execution, reacting immediately to price changes. The ITS was managed by the Securities Industry Automation Corporation (SIAC).

Understanding Nasdaq Intermarket

Nasdaq Intermarket was an electronic marketplace where the National Association of Securities Dealer members could execute trades, communicate, and receive quotations on stocks listed on the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE). Formerly known as Nasdaq's third market, Nasdaq Intermarket used Nasdaq's Computer Assisted Execution System to connect buy and sell orders.

Nasdaq Intermarket competed for retail stock orders with regional exchanges such as the Chicago Stock Exchange (CHX) and the Boston Stock Exchange (BSE). By connecting several stock exchanges, the Intermarket System gave traders access to additional buyers and sellers, increasing liquidity and competition, and increasing available investing capital.

Nasdaq Leaves Intermarket

Nasdaq had been a part of the ITS since its creation in the 1980s, but in 2005, Nasdaq announced its intentions to withdraw from the ITS the following year. The ITS was originally created when most trading was done via a manual process by floor-based traders. Technological advances since that time have introduced new and more innovative systems for conducting trade activity in a fast, connected atmosphere.

In announcing its withdrawal from the ITS, Nasdaq cited the outdated setup of the system and said a private, more efficient and high-tech linking system would be a better option. That position aligned perfectly with Nasdaq’s recent acquisition at that time of Brut, LLC, which maintained an electronic communications network.

A key aspect of Nasdaq's withdrawal from ITS was the fact that it would now rely on its own system, allowing it to capture more market share from the NYSE, as the world was moving away from traditional floor brokers to electronic exchanges. It demonstrated that Nasdaq was shifting with the times and adapting to the new ways of conducting trading.

Nasdaq Market Center Execution System

Nasdaq now has a platform called the Nasdaq Market Center, which uses Brut tools in an electronic communications network (ECN). This ECN can enable automated, electronic communication and activity. Brut systems are linked to other market centers trading Nasdaq securities, along with national securities exchanges such as the NYSE.

Since its acquisition of Brut, Nasdaq has integrated that system with other tools including SuperMontage and INET to form a comprehensive system that was at one point known as Single Book, later to be referred to as the Nasdaq Market Center Execution System.

Nasdaq was the first electronic exchange and was a small, fledgling exchange when it began. Now, it is one of the largest exchanges in the world, where many of the biggest companies are listed, such as Apple, Facebook, Tesla, Microsoft, and Amazon. In total, over 3,300 companies are listed on the exchange and it carries out 1.8 billion trades per day. It is located in New York City's Times Square and its building is a famous landmark, recognized by its large electronic display.