From the June 2008 issue of Investment Advisor • Subscribe!

Pinning Down Prices

Nasdaq rolls out a trading replay and analysis tool

It seems almost providential that at a time when financial market gyrations have been keeping broker/dealers on their toes that Nasdaq should come out with a vital tool for tracking stock market trades. But Claude Courbois, associate vice president of data product development at Nasdaq, says the new tool, Market Replay, has been in the works for a while, and even if it happens to have been released when market participants are looking to get as much precision as they possibly can to keep abreast of the constant volatility they are facing, Market Replay could play an integral role in the ongoing need for market precision.

"This is all about confidence--about getting people confident to trade and getting them confident about investing in the market," Courbois says. "We've had a great response to the service that Market Replay provides because really want data that is a lot more precise, particularly in these times, when the market is moving so fast."

Market Replay is a replay and analysis tool, allowing users to view, with a simple click of their mouse, a consolidated order book data for Nasdaq-, NYSE-, and Amex-listed securities at any point in time. A Web browser-based application, Market Replay gives broker/dealers what they need to validate best execution of trades and Reg NMS compliance, and enables them to rebuild an entire trade so that they can send their clients a Nasdaq-validated screen shot of the moment their particular trade occurred, thereby assuaging whatever concerns investors might have.

"Broker/dealers are struggling to give investors the confidence they need," Courbois says. "Market Replay allows a broker/dealer to see every price a stock has touched to the millisecond."

For companies such as New York, City-based Lime Brokerage, which caters to high-speed, automated trading firms, Market Replay is a welcome and vital addition to their suite of tools. Very often, customers complain that trades have been erroneously executed, says John Jacobs, director of operations at Lime, and for traders to be able to contest the claims properly, they need to have excellent ammunition.

"Market Replay can help us go back and review whether a trade really needs to be busted or not, and it helps us be stronger advocates for our clients," he says.

For any trading desk, Market Replay is an invaluable too, because it can service a range of customer requests related to all matters of trade pricing and compliance, Jacobs says. Prop trading desks and even high-net-worth individuals interested in trade price information would be well served by it, he says.

But the question some have is whether there really is a widespread interest for that kind of minute price detail. Financial advisors like New York-based Hemant Singh, founder of the independent advisory firm Private Wealth Management, don't doubt that broker/dealers, especially those that are servicing high-speed, automated traders, would be in an advantageous position by having Market Replay in their repertoire, as they would be able to offer a greater level of service to their clients. However, Singh believes that Market Replay would be more of a "back up" resource than a primary tool, because he doesn't think that market participants, or retail investors, at any rate, are clamoring for millisecond-level precision. Tools such as Nasdaq's Level II, which helps investors gain a better understanding of the current trends in the securities they're invested in as well as the technical factors that may be influencing their price, are very comprehensive, Singh says, and together with the time and sales data readily available today, provide solid back-up for any questions or doubts that investors might have.

However, there is no denying that precision is key, especially today when participants are more jittery than ever, and financial transactions are complex, so there definitely has to be a place for a tool as cutting-edge as Market Replay.

"There are other tools out there but they are not so easy to use," Jacobs says. "The thing about [Market Replay] is that it is a standard Windows application, you can expand out very easily, and you don't need any technical knowledge to use it."

Market Replay was developed with Adobe Flex 3 and deployed on Adobe AIR, both of which launched at the same time as the tool itself. Adobe Flex is a cross-platform framework for creating rich Internet applications (RIAs) while Adobe AIR lets developers use their existing Web development skills in HTML, Ajax, Flash and Flex to deploy RIAs to the desktop.


Savita Iyer-Ahrestani is a freelance business journalist who is currently based in Arnhem, The Netherlands. She can be reached at siyerwriter@yahoo.com.

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