Nasdaq, BATS to stop offering flash trading

CHARLOTTE, North Carolina -- The operators of the Nasdaq and BATS stock exchanges said Thursday they 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. Randy Williams, a spokesman for BATS which also operates computerized stock exchanges, said his company will also quit the practice.

A spokesman for another computerized exchange operator, Direct Edge, did not immediately return requests for comment.

Flash orders give certain members of exchanges including Nasdaq, BATS and Direct Edge 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, which also called on rival markets to make the same decision.

Critics, including Sen. Charles Schumer, a New York Democrat, 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.