The operator of the Nasdaq stock market said Thursday it will stop a practice that gives some brokerages a split-second advantage in buying or selling stocks.
Nasdaq OMX Group Inc. is voluntarily ceasing the practice, known as flash order trades, on Sept. 1.
Flash orders give certain members of exchanges including Nasdaq, Direct Edge and BATS the ability to buy and sell order information for milliseconds before that information is made public. High-speed computer software can take advantage of that brief period to allow those members to get better prices and profits.
Earlier this week, Securities and Exchange Commission Chairman Mary Schapiro said the agency is moving in the direction to ban the practice.
“We recognize the SEC’s rulemaking process will take time, yet as an exchange we have the ability to move on our own,” Nasdaq said in a statement.
The exchange operator also called on rival markets, including Direct Edge and BATS, to make the same decision.
Critics, including Sen. Charles Schumer, D-N.Y., have said the practice clouds transparency and benefits those with advanced trading software. On Tuesday, Schumer said in a statement that Schapiro personally assured him the SEC would ban the practice.
Shares of Nasdaq rose 9 cents to $21.75 in afternoon trading.