By John McCrank
(Reuters) - Nasdaq Inc (O:NDAQ) on Monday said it will ask regulators to let it give thinly-traded companies that list on its main U.S. stock exchange a choice as to whether their shares can be traded on other exchanges, with the aim of making it easier for investors to buy the stocks.
There are 13 U.S. stock exchanges and currently, regardless of where a company is listed, its shares trade on all of them, as well as around 40 private broker-run trading venues. Critics say this fragments trading activity, making it more difficult for buyers and sellers to find each other.
Allowing smaller companies to concentrate the trading of their shares on a single exchange would create trading efficiencies and also force listing markets to compete more vigorously to list and trade the shares, executives from Nasdaq told the U.S. Securities and Exchange Commission.
"Our markets are no longer able to support small growth companies," said Frank Hatheway, Nasdaq's chief economist, referring to the U.S. markets overall. He was taking part in a roundtable discussion hosted by the SEC in Washington on the topic of improving the markets for thinly-traded companies.
Under the Nasdaq plan, trading on private venues, such as dark pools, would be allowed to continue as usual.
Rival exchange operator Cboe Global Markets (O:CBOE) balked at the idea of exchanges being allowed to have monopolies on the trading of certain stocks, saying it would carry the risk that exchanges would begin charging higher fees for things like market data and exchange connectivity.
"The exclusive listing concept is interesting but it is a bit of a blunt instrument," Cboe President Chris Concannon told the roundtable, made up of industry experts and academics.
Of the 13 U.S. stock exchanges, 11 are owned by either Intercontinental Exchange Inc's (N:ICE) NYSE unit, Nasdaq, or Cboe. Another is in the process of being bought by NYSE.
IEX Group, which runs only one exchange, recommended to the panel giving thinly-traded companies the option of having their stocks trade on one exchange per exchange group, which would mean a stock would trade on four exchanges instead of 13.
In October, the U.S. Treasury Department recommended that the SEC allow companies to decide how many stock exchanges their shares trade as part of a broader regulatory review.
The SEC is seeking public comment on the issue.