Nasdaq OMX Group (NDAQ) may forgo profits on a planned new equity clearing service in an effort to arrest the fall in its share of U.S. stock trading, an executive said Friday.

The move is among a raft of measures planned after Nasdaq OMX Group's share of U.S. equity trading fell below 20% on some days in May, despite cutting prices to fend off the challenge of new electronic platforms.

The operator of the Nasdaq Stock Market also plans to introduce new order types that can route orders through private pools of liquidity, an approach that resembles rival platforms operated by Direct Edge ECN LLC and BATS Exchange Inc.

Nasdaq OMX's planned clearing service would rival a similar near-cost pricing structure offered by the Depository Trust and Clearing Corp., and is contingent on the move boosting its share of trading volume, according to Brian Hyndman, senior vice president of Nasdaq Transaction Services.

Its willingness to clear stock trades at cost follows a U.S. Treasury-backed plan, announced this week, that would mandate clearing of standardized over-the-counter derivatives, a boon to derivatives exchanges like CME Group Inc. (CME) and IntercontinentalExchange Inc. (ICE) that are set up to handle such trades.

Nasdaq OMX itself has sought inroads to the OTC markets through its International Derivatives Clearing Group venture, which clears interest-rate swap trades, but the focus remains on its U.S. equities-market share, which has dropped to 22% from 27% since January, according to a Raymond James report.

Nasdaq Clearing Corp., slated to launch in the fourth quarter, aims to be cheaper than the DTCC; despite the latter's status as a non-profit, member-owned utility, the company carries a substantial amount of overhead that keeps the overall price higher than it needs to be, Hyndman said.

A streamlined alternative from Nasdaq OMX should bring in more trade, according to Hyndman.

"If we're delivering value to our customers, we should see a bigger portion of that volume and market share come to us."

 
   Order Types A New Focus

Nasdaq OMX also is experimenting with new order types that change the way stock orders are directed through its markets, looking to draw more traders with faster and cheaper executions.

On May 1, the exchange introduced a strategy nicknamed "Thrifty" that routes orders from the Nasdaq Stock Exchange to Nasdaq OMX BX, a handful of private liquidity pools, and the New York Stock Exchange, at a price that is lower than other public exchanges, according to Hyndman.

And starting in June, Nasdaq OMX will introduce an order type known as "Flash," which will check stock orders first against the Nasdaq Stock Exchange before routing them through an internal feed viewable only by Nasdaq OMX customers, which "should offer a more aggressive price" before going out to the public market, Hyndman said.

It isn't quite a dark pool, but Hyndman acknowledged it is similar to the approach of Direct Edge, which checks orders against its main book and then, if the order isn't filled, sends orders to a dark pool accessible by about 25 participants before it goes out to other markets.

Dark pools are private markets where large equity orders are transacted anonymously.

At Direct Edge, officials said clients must opt in to have their orders routed through the dark pool, but Hyndman said Nasdaq's "Flash" order type will route orders via the internal feed by default.

Customer feedback has been positive so far, Hyndman said, and more varieties of the "Flash" order are in the works.

The fusion of off-exchange liquidity pools and open markets is gaining traction among equities platforms.

BATS Exchange earlier this month debuted a new strategy called Dark Scan, which flows orders through dark pools before they hit the main order book, in exchange for a rebate of 1 cent per 100 shares traded.

The practice has drawn criticism from some who take issue with routing trades through dark pools by default, forcing clients to opt out.

Another argument is that liquidity on other exchanges could disappear while a stock order makes its way through various dark pools.

Joseph Mecane, chief administrative officer at NYSE Euronext (NYX), said Friday that the exchange plans to file a comment letter with the Securities and Exchange Commission opposing some of these practices.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com