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December 1, 1998

At Dead line

By John Byrne


* On November 13, STRIKE, the electronic communications network (ECN) backed by some of Wall Street's top equity-trading firms, received a no-action letter from the Securities and Exchange Commission. The no-action letter permitted STRIKE to commence trading in the absence of SEC guidelines governing ECNs and other alternative trading systems.

On November 19, STRIKE began limited trading. The following day, STRIKE executed more than a half-million shares on 15 stocks for five partners during three hours of trading. Plans are now afoot for more full-fledged trading among all partners.

Partners include Bear, Stearns & Co., Herzog, Heine, Geduld, Salomon Smith Barney, Donaldson, Lufkin & Jenrette and Cantor Fitzgerald & Co. On the technology side of Wall Street, Sun Microsystems and NeoVision are partners. Pundits are watching to see if STRIKE will take market share from established ECNs, such as Reuters Holdings' Instinet. STRIKE is run by New York-based STRIKE Technologies, which is headed by Arthur Pacheco, the former co-head of Nasdaq trading at Bear Stearns.

PHLX Rebels

* Some traders at the Philadelphia Stock Exchange (PHLX) are up in arms about its proposed merger into the entity currently known as the Nasdaq-AMEX Market Group. At issue are fears that the proposed merger will be implemented without the full democratic consent of PHLX membership. Some traders are concerned that the PHLX may divest of the exchange as a sale of assets, which would only require a simple majority vote of 51 percent of its members. "There is now a revolution fast and furious on the floor," Francis Recchuiti, an attorney retained by several PHLX members opposed to the merger, was quoted saying in Securities Week.

Last month, Recchuiti filed a complaint with the Delaware Court of Chancery seeking the release of records that he alleges show evidence of unlawful acts by the present board. Later, he filed a complaint against the full board that was intended to delay the merger until PHLX members' concerns are considered.

Data Blues

*The BlockDATA subsidiary of the AutEx Group is challenging Nasdaq's plan to introduce a proprietary daily service providing market makers' trade data on a Nasdaq web site. The data includes daily share volume for market makers, and historical and other information. As envisaged in a proposal filed by Nasdaq with the Securities and Exchange Commission, Nasdaq would charge buy-side institutions and others for accessing data as long as the market makers that originally generated the data gave consent.

AutEx, which has built a sizable business doing something similar to what Nasdaq is proposing, has objected to the plan. In two letters to the SEC, AutEx said Nasdaq would be breaching its mandate as a quasi-governmental entity. One letter complained that "where commercial products are derived from regulatory activities, the regulator is in a position to obtain an unfair advantage over private enterprises offering the same products." Nasdaq will reportedly look at AutEx's objections at a board meeting on December 10.


* On November 1, the day before the gubernatorial elections in Maryland, the National Association of Securities Dealers announced an agreement with the Maryland Department of Business and Economic Development and the Montgomery County Department of Economic Development. In a press release, the NASD stated: "The NASD will be consolidating certain of its regional operations at a new campus in [Maryland's] Montgomery County, and is in negotiation for delivery of the first phase, an office facility of approximately 250,000 square feet, by the third quarter of calendar year 2000. Additional facilities may be phased in over a four-year period."

The press release is vague about what operations it is actually consolidating. At the moment, the NASD has nine locations in the greater Washington region, which includes Maryland. Five are in Montgomery County. The consolidation would likely make the NASD eligible for both county and state job credits, as well as state training grants. No information was available about how many NASD staffers might be relocated. Montgomery County and Maryland officials denied there was any connection between the announcement and the gubernatorial election, which returned Democratic Governor Parrisa Glendening for another term.