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November 1, 1998

Godfather of SOES Writes For The Little People'

By Gregory Bresiger

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  • Godfather of SOES Writes For The Little People'
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Harvey Houtkin is not happy with the big market makers of Wall Street.

But given these politically-correct times, please don't call this slightly paunchy revolutionary any of these horrid names: a bandit, a roach, a shark, or even an electronic highwayman. Names do hurt this author.

Houtkin, who has spent over a decade trying to pull an end-around on the powers that be in the brokerage world, is angry. And he says the average individual investor who has just sold a stock isn't in the mood for beer and Skittles either.

"I do not believe there is a person in this country who has interacted with the brokerage community in the execution of a trade who has not felt screwed," Houtkin writes.

And the author wasn't even talking about Smith Barney's famous "boom room." Or Prudential Securities' poisonous partnerships. Or Dean Witter's wretched rollups. Or the "loaded" with sales charges mutual funds of many of the wirehouses, many of which have embittered tens of millions of investors, who when they hear the word broker launch into a paroxysm of invective too brutal to put into these gentle pages, or any family publication.

SOES Bandit

No, Houtkin, the original Small Order Executive System, or SOES bandit ah, advocate is talking about something more basic than a few bad products that keep the lowly scribes gleefully writing about the dead and wounded of investing. He believes the basic problem of the trading business is the flawed relationship between the financial intermediary called a broker and the individual investor he or she supposedly wants to serve.

Actually it's the investor who gets served up on a platter, Houtkin contends. Will the broker put the interests of the firm or the investor first? For Houtkin, the preceding was a rhetorical question.

"Putting faith in your broker to do the right thing is like Little Red Ridding Hood trusting the wolf," Houtkin writes.

But Houtkin wants to do more than pump up a kind of trading firm that he runs and champions. He wants to invite more rivals for the big Wall Street firms that he detests.

This book is a primer for trading without brokers, for investors becoming opportunistic DAET (Direct Access Electronic Trading) traders who make their own profits without the direction of "full-service brokers," a revolutionary concept. It is also an invitation for those interested investors to become DAET traders so they can trump what Houtkin believes are the antiquated trading technologies of the big firms.

Houtkin depicts the big market makers as evil Luddities, who he contends have a stake in slowing down the Information Revolution.

Think of it: If Houtkin is right, then he may someday be regarded as the anarchist who humbled the big boys of Wall Street. If he is right, then the Merrill Lynchs of this world are reactionaries fighting a war that is already lost.