Nasdaq OMX has pulled the plug on its proposed clearing venture and will not move forward in its planned attempt to take on an industry utility.
Nasdaq OMX, which had been slated to begin operations this year, "has decided to suspend its continuous net settlement" program for U.S. equities, Nasdaq said yesterday in an "Equity Trader Alert" on its web site.
Questions abounded for weeks about the new clearing service. Would it be technically feasible to use it and DTCC at the same time? Would it really be able to undercut DTCC on price? Would it really start offering services this year?
Still, increased competition was the driver for Nasdaq OMX wanting to go head-to-head with the industry’s utility, the Depository Trust and Clearing Corp. (DTCC) and its subsidiary, the National Securities Clearing Corp. (NSCC).
Nasdaq OMX has said it would begin operating sometime in the second half of this year. But given no recent filings at the SEC, it had become obvious that the project was either delayed or dead.
Its rationale was that firms were paying too much for clearance and settlement. Earlier this year, Nasdaq officials were telling would-be customers that it would offer the same services as DTCC at fees that were "50 percent less." Those numbers were vigorously disputed by DTCC. One DTCC official said it was "not an accurate representation."
Nevertheless, just the potential of Nasdaq competition changed DTCC and its subsidiaries, Nasdaq officials claimed in the Trader Alert.
"DTCC," Nasdaq wrote, "has made a number of changes to its National Securities Clearing Corp. (NSCC) pricing models and schedules, and promised significant improvements in record and guarantee processing, since Nasdaq OMX first indicated its intention to enter the clearing space."
