Publications
Publications
- July 1998 (Revised August 1998)
- HBS Case Collection
Optimark: Launching a Virtual Securities Market
Abstract
Bill Lupien's OptiMark Technologies, Inc., plans to launch a super-computer system in September, 1998 that he believes will release previously withheld liquidity to the securities market. While today's market matches those trades based on price and size, Lupien's system proposes to match trades based on investors' willingness to trade across a continuous range of outcomes. Investors enter changeable profiles into the system that express a willingness to trade specific volumes at specific prices--for example, no shares at $51.50; 10,000 shares at $51; 20,000 at $50.50, etc. If it works, the system will continuously take in buy and sell orders for stocks from both institutional and individual investors, match them instantaneously at the investor's preferred prices, and execute the trades--all in total secrecy, except for reporting each transaction to the market once completed. "We in our industry have communicated at a kindergarten level in what we call two-dimensional space--price and size. Those are the two variables--how many do you want to buy and what price?" explained Lupien. "We call OptiMark three-dimensional because it can represent degrees of investor discretion (willingness to trade) as well as price and size. By adding a third dimension to the market, we create an almost infinite language." Includes color exhibits.
Keywords
Information Technology; Financial Markets; Product Launch; Financial Services Industry; United States
Citation
Sviokla, John J., and Melissa Dailey. "Optimark: Launching a Virtual Securities Market." Harvard Business School Case 399-005, July 1998. (Revised August 1998.)