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SOES was developed by Nasdaq in 1984. Upon its introduction, the NASD and the market makers never expected SOES to be used actively. Its predecessor system, the Order Confirmation Transaction Service System (OCT), was virtually never used in its years of availability despite the fact that it offered tremendous conveniences in communicating orders efficiently and quickly between firms. OCT allowed all firms to communicate orders between each other and execute orders electronically. In reality, an e-mail system like this would have saved millions of dollars in telephone bills alone for the firms that used it and would have assured accuracy for order execution and comparisons, with concomitant staff savings. And yet no one used it! Do you want to know why no one used it? Because Wall Street did not want to relinquish payment for order flow and market-maker accommodations and "conventions." It was far more important to keep the status quo than to save money, become more efficient, and be fair. |
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The introduction of SOES in 1984 meant very little to the industry because, like OCT, no one expected to use it or to permit anyone else to use it. Even though this system was even better than OCT and delivered instantaneous executions of orders, it made no difference to the industry. |
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During the next 4 years SOES was hardly used at all (similar to OCT) until the crash of 1987 created a scenario, which turned me from a nice kid from Brooklyn into the SOES bandit. The circumstances of the crash in conjunction with my extensive Wall Street background enabled me to take the features of SOES and turn it into perhaps the greatest trading mechanism available since the invention of the telephone. In 1988, the system became a reality. |
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SOES was established for the immediate execution of orders of 500 shares or fewer. Thereafter, the share limit was raised to 1000 shares of stock. At that time there were no caveats or rules concerning use of SOES. Shortly thereafter the NASD published trading rules that addressed the questions of who could use SOES, how often a person could use |
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