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May 31, 1998

At Deadline

By John A. Byrne

31(a) Breakthrough

The National Association of Securities Dealers has filed a proposal with the Securities and Exchange Commission seeking relief on Nasdaq 31(a) transaction fees, according to reliable sources in Washington. The proposal, approved by the NASD's board of governors, seeks a reduction of up to $16 million, based on current trade volume. The reductions would be triggered by counting a typical riskless principal trade, involving two transactions, simply as a single trade. In addition, the rule seeks to create a step-out function which would result in single prints, instead of multiple prints, on limit-order business.

Frank Zarb, chairman and chief executive of the NASD, hinted that 31(a) relief is in the air. "I wouldn't be surprised if you see a rule that begins to fix it," Zarb told Traders Magazine's Washington editor Jeffrey L. Winograd. For its part, the SEC was more forthcoming. Richard Lindsey, the SEC's director of market regulation, told our man: "I believe that the [NASD] board voted, and I expect a rule-filing soon."

Meanwhile, on Capitol Hill, lobbyists fighting for relief on 31(a) transaction fees are pounding the pavement. Sen. Judd Gregg (R-N.H.), chairman of the Senate Appropriations Commerce, Justice, State and Judiciary Subcommittee, recently complained about legislative attempts to reduce fees.


Two of the most noted finance academics are forming a new learning institute for buy-side and sell-side traders. Robert Schwartz and Robert Wood, finance professors at Baruch College and the University of Memphis respectively, are collaborating with communications expert Douglas Parrillo on the newly-formed Security Traders Institute (STI). Parrillo is a former senior vice president of corporate communications at the National Association of Securities Dealers.

The primary goal of STI is to provide rookies and veterans of the trading trenches instruction on how to develop and perfect their professional skills.

Courses will cover the rules and regulations of equity trading. STI said it will announce a schedule for its planned courses in the U.S. later this year. STI said it will also be active in the new Series 55 equity-trader examinations.

OptiMark Hoopla

The Bank of New York's BNY ESI & Co. has signed an agreement with OptiMark Technologies to be a designated broker of the OptiMark Trading System, making it the first consent agreement announced by OptiMark, which is now based in Jersey City, N.J.

While OptiMark's implementation is still pending, the agreement with BNY ESI does give OptiMark some bragging rights. BNY ESI, a separate brokerage affiliate of The Bank of New York, and the successor of ESI Securities Company, has been an agency broker for more than two decades.

OptiMark is designed to allow buyers and sellers to represent anonymously, and in a non-disclosed manner, their willingness to trade over a continuous range of prices and sizes based on a mutual-satisfaction profile. Some 140 institutional customers, handling more than $2 trillion in annual equity-trading volume, have made arrangements for direct links with OptiMark.

Year 2000

Richard Ketchum, the National Association of Securities Dealers president, told Wall Street firms that Year-2000 horror stories are not fiction. In fact, the horrible truth is that the possibility of firms missing their deadlines for their Year-2000 compliance is looming large.

"There is a long and venerated tradition of missing information technology (IT) deadlines, not just in our industry but across the board," Ketchum said in prepared remarks for NASD Regulation's annual spring conference. Missing deadlines for Year-2000 compliance could spell major problems, such as botched trade reporting.

Further compounding his fears, Ketchum said that an NASD survey on Year-2000 compliance showed that only 40 percent of NASD member firms are more than half through their Year-2000 projects. Firms are spending heavily on Year 2000. Ketchum said IT managers have indicated that Year-2000 compliance will consume about 60 percent of their budgets.