Commentary

Richard Repetto
Traders Magazine Online News

Why Do Exchanges Own Multiple Licenses? It's Not Hard To See, Look at the SEC

In this recent research note, Sandler O'Neill + Partners, L.P. Principal Richard Repetto examines why the public exchange operators hold multiple licenses and that rationale behind this phenomenon.

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August 31, 1998

At Deadline - SOES

By John A. Byrne

On August 31, the General Accounting Office (GAO) issued its report on the Small Order Execution System. Much of the contents of the independent federal agency's report were leaked ahead of publication. Nevertheless, the definitive piece does have some surprising things to say about SOES.

"SOES day traders' ability to access Nasdaq quotes, and trade faster through SOES than market makers and their customers could trade through other systems, has provided them an advantage that they have used to profit at the expense of market makers and their customers," the GAO report stated.

The report is generally supportive of SOES, noting that despite its "unintended consequences, SOES has benefited the market by providing efficient execution of securities transactions at the best bid-and-asked price, and [by] allowing investor orders to be executed without manual market-maker intervention."