Nasdaq Trading System Approved

The Nasdaq Stock Market won final approval from regulators to start its new SuperMontage trading system within the next six weeks.

The Securities and Exchange Commission on Wednesday unanimously approved letting Nasdaq begin using SuperMontage on either Sept. 6 or Oct. 11. The start date will depend on whether any electronic-trading networks, known as ECNs, sign up in the next nine days for an alternative computer display system to post prices at which their customers are willing to buy and sell stocks.

Nasdaq built SuperMontage to win back business from ECNs, which have siphoned off trades from the second-biggest U.S. stock market, luring away almost half of the daily trading in Nasdaq shares by offering anonymous transactions and lower costs. SuperMontage will offer similar features and wants to include quotes of any ECN willing to participate.

“We expect to see an increase in Nasdaq’s role in trading of Nasdaq stocks because of SuperMontage,” said Dean Furbush, who oversees Nasdaq’s trading systems.

SuperMontage was deemed ready for real trading by Nasdaq’s staff in late July. As part of a compromise, the SEC voted on July 26 to establish an alternative display facility, or ADF, a computer system that ECNs could use as an alternative to SuperMontage.

To date, only one electronic-trading network, Bloomberg Tradebook, has said it will register to use the alternative display facility. The networks may have been reluctant to commit in part because registration required that ECNs commit to using the facility. Misrepresenting their intention carried criminal penalties, a stipulation the SEC removed Wednesday.

If no other trading systems sign up for the facility within five business days of when the new usage certification will be available, SuperMontage can begin. That would put the start-up date as early as Sept. 6. In that case, Nasdaq’s Furbush said, SuperMontage would begin on Sept. 17, so as not to start the week of the anniversary of the terrorist attacks.

If an ECN does sign the certification saying it intends to use the facility, SuperMontage can start on Oct. 11.

The alternate facility is an electronic bulletin board where ECNs and Nasdaq dealers can post prices at which their customers are willing to buy and sell stock. For the first three months, posting prices in the system will be free. Unlike SuperMontage, the facility does not allow customers to execute trades automatically.

Advisor Optimism Jumps, Poll Says

Optimism about U.S. stocks surged last week among the ranks of financial newsletters, with bulls outnumbering bears, according to a weekly poll by Investors Intelligence newsletter.

The percentage of newsletters considering themselves bullish, or optimistic, rose to 45.7 from 36.7 the week before. The percentage considering themselves bearish, or pessimistic, slid to 31.5 from 40.

For four of the last seven weeks, bears outnumbered bulls among newsletters--an exception to the trend in which optimists have dominated since October 1998. In the three weeks after the Sept. 11 terrorist attacks, bears also dominated.

Technical analysts, who try to predict stock moves based on price patterns and other statistical measures, see peaks in investor pessimism, and lows in optimism, as so-called contrarian indicators that stocks may be poised to gain.

When the majority of investors are bearish, the reasoning goes, they may have already sold out of the market, clearing the way for buyers to move in and ignite a rebound. By contrast, a surge in bullishness can be a sign stocks are due to fall because investors who view the market favorably already may have bought stocks.

Last week marked the first time the benchmark S&P; 500 index notched five consecutive weekly gains since the period from Aug. 4, 2000, through Sept. 1, 2000. The S&P; hasn’t had a longer streak since an eight-week period that ended March 20, 1998. But stocks have wavered since. Since last Thursday’s close, the S&P; 500 has slipped 4.7%.

Bloomberg News