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April 30, 1999

Will Bloomberg Tradebook Become A Stock Exchange?

By Shailaja Sneelakantan

With the Securities and Exchange Commission's Regulation ATS giving alternative trading systems (ATSs) the green light to register as stock exchanges, what established ATSs will actually do so?

While Reuters Group's Instinet considers its options, Bloomberg Tradebook is lukewarm so far to the idea of becoming a stock exchange.

"We would have to file in advance before updating any technology," said Kim Bang, a business manager and principal at Tradebook. "The technology blueprint has to be released to the SEC for a comment period. All this makes us apprehensive."

Bang says that registering as an exchange could be cumbersome.

However, being listed as an exchange looks attractive to Tradebook on one front - with the opportunity to get more listed business.

"If we set up as an exchange, then we could execute and match the order flow on the listed exchanges," Bang added. "That's exciting."

Would becoming an exchange be a strong business model? Bang says it is not clear if the stated benefits present a compelling model versus staying as a broker dealer.

One of the benefits is the print revenue that would accrue for an ATS exchange.

About the New York Stock Exchange considering forming strategic partnerships with some electronic communications networks (ECNs), Bang declined to comment.

Turning to the requirement in Regulation ATS that forces ECNs to publicly display more institutional volume, Bang says it will improve the liquidity in the public marketplace. The implementation of that requirement has been postponed from April to August, largely because one major ECN (sources identify Instinet) was unable to quickly comply with Regulation ATS, due to systems constraints.