By Jonathan Spicer
NEW YORK (Reuters) - The Nasdaq Stock Market and BATS Exchange said in separate statements on Thursday they will "voluntarily" stop offering so-called flash orders, a controversial service that gives certain firms an advance look at market-bound trading orders.
No. 2 U.S. exchange operator Nasdaq OMX Group Inc
A spokesman for BATS, the third-biggest exchange, said about an hour later that it too would withdraw its flash program, called BOLT, by September 1.
Both exchanges began flashing orders June 3, closely mirroring a program offered for three years by Direct Edge, a fast-growing alternative venue that on Wednesday defended the program as one that lowers trading costs and adds liquidity.
SEC Chairman Mary Schapiro said this week the agency was drawing up plans to eliminate flashes, which critics say cloud transparent prices and benefit those with advanced trading software.
"We recognize the SEC's rulemaking process will take time, yet as an exchange we have the ability to move on our own," said Nasdaq, the second-biggest U.S. exchange operator.
In its statement, Nasdaq called on rival markets to make the same decision. BATS said in a July 7 newsletter it supported a review of flashes and last week said it would back an outright ban.
Flash orders last for a fraction of a second before the exchange or alternative venue routes them elsewhere to the best national bid or offer.
Nasdaq OMX shares were down 0.1 percent on Thursday. It reported a 31 percent quarterly profit drop earlier in the day.
(Reporting by Jonathan Spicer; Editing by Richard Chang and Gerald E. McCormick)
