The ITS connects competing exchanges for the purpose of choosing the best market for a particular trade. The system is operated by the Securities Industry Automation Corporation (SIAC), which is co-owned by Nyse and Amex, but the plan requires unanimous approval of all connected markets for changes to the rules governing the system.

In a statement Nasdaq says it will complete the pullout from ITS in 2006 upon implementation of Regulation NMS by the US Securities and Exchange Commission. The move has been approved by the exchange's board of directors and will now be submitted to the SEC for approval.

Nasdaq argues that the 25-year-old ITS system can now be replaced with a more efficient, technologically advanced inter-market linkage. The exchange says it can improve its services to investors by pulling out of the ITS initiative and replacing it with a private electronic linkage obtained when it acquired the Brut ECN from SunGard last year.

Chris Concannon, executive vice president at Nasdaq Transaction Services, says the move will help Nasdaq capture market share from Nyse: "The markets are witnessing a shift in trading activity away from the traditional exchange floors and towards automated trading alternatives like Nasdaq. Our withdrawal from the ITS plan reflects our strong belief that the trend of trading Nyse-listed stocks on electronic venues will continue to accelerate in 2005 and throughout 2006.

"By relying on our own private linkage, Nasdaq is positioning itself to capture additional liquidity in Nyse-listed securities."

According to a report by the Wall Street Journal, the withdrawal from the ITS will allow Nasdaq to improve its technology and order-routing systems without needing to go through an approval process that includes other exchanges. A private linkage will also enable Nasdaq to better handle the increasing flow of orders coming from electronic traders who use computer programs to buy and sell stocks.