Jeff Bacidore
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Exchange Speed Bumps: An Indirect Way to Reduce Buy-Side Trading Costs

In this recent blog, market pundit Jeff Bacidore examines the proliferation of exchange speed bumps and how they can save traders money.

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March 19, 2008

The Story Behind This Month's Cover Story

By Gregory Bresiger Editor-in-Chief

It's human nature for most people not to like change. But change, especially technological change, is often essential. That's what many people believe about the world of securities lending, where electronic trading has become a necessity. Yet in writing this month's cover story on securities lending and potential new securities lending models, CQ&D came across an unusually large number of "no comments."

"Well, my bosses asked me not to talk to you," said the head of securities lending for a major broker-dealer. This executive had previously told me, in another article, that he would be interested in a plan to establish some sort of securities lending exchange and might use it.

Two hedge fund trade associations, representing some managers who have complained that they don't get a fair shake when they lend or borrow stocks, also said through spokesmen they weren't interested. Yet several managers had privately told me that they were very interested in any plan that could earn more money for their funds.

Major custodians and prime brokers declined comment on new securities lending platforms, including the one about to be started by Lendex LLC. The latter is championed by John Tabacco, of LocateStock, and former SEC Chairman Harvey Pitt.

In part, these two men are betting that their electronic system will be so superior to today's often manual system of securities lending that clients will force their dealers or agents to come to Lendex.

Are they right? We'll find out this spring. That's when Lendex is slated to open. And please read our news section this month, where Lendex officials told CQ&D which custodian will act as the central credit counterparty (CCP) for the new exchange.

The CCP, without a doubt, will be one of the key elements as to whether Lendex is successful. Also, as we reported in our last issue, many clearing firms are concentrating on obtaining new institutional business. But in a Q&A this month, Bear Stearns clearing officials explained why they are making renewed efforts to capture retail business.

As always, we thank you, our readers, and invite comments, questions and suggestions on what should be in CQ&D.


Gregory Bresiger


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