Nasdaq Cuts Fees to Compete on Internet
- 25 May, 2000 12:01
BOSTON (05/25/2000) - Nasdaq has been working to lure new customers by cutting the fees for its servicesas much as 80%. But according to critics, the price cuts are poorly timed and bad for the exchange's bottom line.
Last month, New York-based Nasdaq Stock Market Inc. announced that it will cut the prices for its bare-bones stock quote service from $2 to $1 per month for individual investors.
Then, last Monday, the exchange said it will reduce its midlevel market information service, which offers stock quotes and deep real-time market information, by 80% - from $50 to $10 per month.
"We want to be the lowest- cost provider of trades and information, and this is consistent with that," said Nasdaq spokesman Scott Peterson. "We have been lowering costs on items across the board."
The lower fees are aimed at helping the exchange better compete in the Internet age, said Peterson. But, he insisted, they have nothing to do with pressure from electronic communication networks.
"As markets evolve and the Internet becomes more prevalent, costs are being forced lower," he said.
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Nasdaq critic Alan Davidson, president of Zeus Securities Inc. in Long Island, New York, and head of the Independent Broker-Dealer Association, said Nasdaq is already facing other problems, such as implementing a new decimal-based pricing system.
Cutting prices, he said, will leave the exchange with less money to pay for the much-needed and much-delayed upgrade.
"The failure of Nasdaq to come up with a comprehensive program where all members can have access to 24-hour trading is also very distressing," Davidson added.
But Peterson said the price cut will be revenue-neutral, with the lower costs being offset by higher volumes.
Only a third of Nasdaq'sincome comes from selling market data; the rest is made by trading and listing fees.
"It's an important part of their revenue stream, but I don't think the fee cut will be a huge problem," said Lawrence Scinto, a consultant specializing in financial services at Menlo Park, California-based SRI Consulting.
While the price cut still needs approval from the U.S. Securities and Exchange Commission before taking effect, some brokerages - beneficiaries of the price cut since Nasdaq doesn't sell its datadirectly to the public - are already planning to pass the savings on to their customers.
"It will certainly help our clients access the market," said Kerry Dukes, president of New York-based online brokerage Trade.com.