What Was the Intermarket Trading System (ITS)?

The Intermarket Trading System (ITS) was an electronic network that linked the trading floors of nine American stock exchanges. Brokers and market makers on any of the linked exchanges could use ITS to find and execute the best price available. A broker on the floor of one exchange could directly place an order through ITS rather than going through a broker on another exchange.

The ITS linked prices on the New York Stock Exchange (NYSE), the American Stock Exchange, the Boston, Chicago, Cincinnati, Pacific, and Philadelphia exchanges, as well as the Chicago Board Options Exchange (CBOE) and the National Association of Securities Dealers (NASD). In 2000, the NYSE stopped using ITS and Nasdaq stopped using it in 2006.

Key Takeaways

  • The Intermarket Trading System (ITS) was an electronic network that linked the trading floors of nine American stock exchanges.
  • Brokers and market makers on any of the linked exchanges could use ITS to find and execute the best price available.
  • As electronic trading on stock exchanges became more advanced, ITS was phased out. The NYSE stopped using it in 2000 and NASDAQ in 2006.

Understanding the Intermarket Trading System (ITS)

The Intermarket Trading System (ITS) began operations in 1978, at a time when trading was a manual process handled by traders working on a trading floor.

ITS started being phased out in 2000 when the NYSE decided it would no longer be using the antiquated system. Notably, the NASDAQ left the partnership in 2006, having decided that the technology was outdated and, in any case, was unsuited to an exchange that does not have a trading floor.

Since then, new and more innovative systems have emerged for conducting trade activity in a fast, connected atmosphere.

In announcing its withdrawal from the ITS, NASDAQ cited the outdated setup of the system and said a private and more technically advanced system would be a better option. That position aligned perfectly with NASDAQ’s then-new acquisition of Brut, LLC, which maintained an electronic communications network.

Its withdrawal from the ITS allowed the NASDAQ to improve its technology and order-routing systems without needing to go through an approval process that included other exchanges. Private linkage also enabled NASDAQ to better handle the increasing flow of orders coming from electronic traders.

The NASDAQ now has a platform that uses an electronic communications network, or ECN. The ECN enables open-access communication and trading activity. Systems are linked to other market centers that are trading NASDAQ securities, along with other national securities exchanges, including the NYSE.

NASDAQ has integrated its ECN system with other tools, including SuperMontage and INET, to form a comprehensive system that came to be known as the NASDAQ Market Center Execution System.