New Trading System Proposed for Nasdaq

WASHINGTON — A securities dealers group is proposing a new trading system that it says would improve investors’ chances of getting a better buy or sell price for stocks on the Nasdaq Stock Market.

Not all brokerage firms like the plan, which could diminish the role of powerful market-makers in Nasdaq stocks.

The National Assn. of Securities Dealers, which operates the Nasdaq market, has dubbed the proposal “Next Nasdaq.” The group submitted it for approval to the Securities and Exchange Commission earlier this week.

The proposed system “responds to the demands of investors and [dealers] for a marketplace that provides for fast and efficient access to the best prices,” the NASD said in its filing to the market watchdog agency.

“The basic intent . . . is to provide increased price transparency,” NASD spokesman Reid Walker said Tuesday.

A major feature of the system is a new central “file” containing orders to buy or sell Nasdaq stock at a specific price. The file, which could be seen by both investors and traders, would provide a neutral, cost-effective way to find a match for their orders, the NASD said.

When the prices of a buy order and a sell order for a stock matched in the file, the trades would be executed automatically, without involving a brokerage firm that is a market-maker in the stock.

The electronic Nasdaq, the nation’s second-largest stock market and home to fast-growing technology companies, is a dealer market. Investors usually buy stock from or sell to a market-maker in the stock, rather than an investor.

Brokerage firms that are Nasdaq dealers have come under scrutiny for their treatment of investors.

The SEC and the Justice Department last year charged that major Nasdaq dealers harassed or refused to trade with others who tried to offer investors a better price for a stock. At other times, the powerful dealers colluded in what amounted to a form of price-fixing and delayed reporting major trades when it could hurt their stock holdings, federal authorities said.