Intermarket Trading System (ITS) Definition

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Intermarket Trading System (ITS) Definition

What Was the Intermarket Trading System (ITS)?

The Intermarket Trading System (ITS) was an electronic network that connected the trading floors of nine different stock exchanges in the United States. ITS might be used by brokers and market makers on any of the connected exchanges to locate and execute the best available pricing. Instead of going via a broker on another exchange, a broker on one exchange might place an order directly through ITS.

The ITS connected prices on the NYSE, the AMEX, the Boston, Chicago, Cincinnati, Pacific, and Philadelphia exchanges, as well as the Cboe Options Exchange (Cboe) and the National Association of Securities Dealers (NASD).The NYSE abandoned ITS in 2000, and the Nasdaq abandoned it in 2006.

Key Takeaways

  • The Intermarket Trading System (ITS) was an electronic network that connected the trading floors of nine different stock exchanges in the United States.
  • ITS might be used by brokers and market makers on any of the connected exchanges to locate and execute the best available pricing.
  • ITS was phased out as computerized trading on stock exchanges evolved. The NYSE discontinued its use in 2000, and the Nasdaq in 2006.

Understanding the Intermarket Trading System (ITS)

The Intermarket Trading System (ITS) commenced operations in 1978, when trading was still a manual procedure performed by traders on a trading floor.

When the NYSE decided to discontinue use of the outmoded technology in 2000, ITS began to be phased out. Notably, the Nasdaq abandoned the collaboration in 2006, deciding that the technology was obsolete and, in any event, unsuitable for an exchange without a trading floor.

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Since then, new and more inventive ways for conducting commercial activities in a fast-paced, networked environment have arisen.

Nasdaq announced its resignation from the ITS, citing the system’s outmoded configuration and stating that a private and more technically sophisticated system would be a preferable choice. That position was ideally linked with Nasdaq’s then-new purchase of Brut LLC, which ran an electronic communications network.

Because of its removal from the ITS, the Nasdaq was able to develop its technology and order-routing systems without having to go through an approval process that involved other exchanges. The private connection also allowed Nasdaq to better manage the rising volume of orders from electronic traders.

The Nasdaq now has an electronic communications network, or ECN, platform. The ECN allows for open communication and trading activities. Systems are connected to additional Nasdaq market centers as well as other national securities exchanges, including the NYSE.

Nasdaq has combined its ECN system with additional technologies like as SuperMontage and INET to develop a complete system known as the Nasdaq Market Center Execution System.

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