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June 30, 1999

At Deadline

By John A. Byrne

Mass Hire

The institutional trading team at HSBC Securities, a unit of HSBC Holdings in London, has moved en masse to Advest, a cross-town rival in New York. The team of five pros made the move after HSBC pulled the plug on its U.S. institutional equity-trading operations. As a result, Hartford, Conn.-based Advest sees its institutional desk doubling to ten pros.

John Fruscella, who headed the HSBC desk, will continue in that role at Advest, reporting to George Bevis, managing director of institutional sales and trading. The other four HSBC traders are Kenneth Farrell, Brendan Kenney, Michael McEneaney and Andrew Irish.

Keeping a watchful eye is John Giesea, the director of capital markets at Advest, and Bevis' immediate boss. The HSBC desk is located in Rockefeller Center in New York.

Two-Sided Nights

Four major broker dealers - Bernard L. Madoff Investment Securities, Herzog, Heine, Geduld, Morgan Stanley Dean Witter & Co. and Salomon Smith Barney - have agreed to post two-sided markets after hours with Eclipse Trading. According to Eclipse Trading co-founder Michael Satow, the four firms will be liquidity providers on the company's after-hours trading platform, Market XT.com. Rather than making markets, the four firms have agreed to post two-sided quotes in the system with no obligations to trade. The broker dealers will be held to the same rules as participating investors.

Market XT.com, expected to launch by the end of the summer, will operate as an after-hours market for limit orders designed solely for individual investors. Trading will be available between 6 p.m. and 8 p.m. Eastern time in 200 of the most liquid Nasdaq and New York Stock Exchange stocks. Orders will be limited to between 1,000 shares and 5,000 shares, with investors accessing the market through sponsoring brokerage firms. Discover Brokerage and Dreyfus Brokerage Services have agreed to participate in the system. Satow said Eclipse has signed agreements with a number of other major broker dealers to participate, but declined to name those firms.

ECN Ties

Of the top ten Nasdaq broker dealers as ranked by the AutEx Group's BlockDATA, only three firms are not currently linked to an electronic communications network (ECN) - Jersey City's Mayer & Schweitzer, USCC Trading and Sherwood Securities. But that may not be the case for long. Both Mayer & Schweitzer and USCC Trading are strongly considering linking with an ECN. A spokesperson for Mayer & Schweitzer parent Charles Schwab & Co. said the firm is very interested in plans to extend U.S. trading hours, and is currently talking to a number of market participants about possible partnerships. Neil Feldman, USCC Trading's president, said his firm is currently in talks with a number of ECNs, and is leaning toward linking with an ECN by the end of the year. "It makes sense," Feldman added. "That's the way the markets are going. You're better off being an owner of [an ECN]."

A spokesperson for Sherwood Securities could not be reached for comment by press time. In the May AutEx rankings of the top 50 Nasdaq brokers in advertised volume, Mayer & Schweitzer, USCC Trading and Sherwood Securities were ranked second, sixth and tenth respectively.

Nasdaq IPO

Nasdaq is considering divorcing itself from the regulatory arm of the National Association of Securities Dealers. In the plan envisaged, NASD Regulation would join forces with the regulatory operations of the New York Stock Exchange. The plan would include an initial public offering for Nasdaq, following a private placement for significant Nasdaq-listed companies and member firms.

Frank Zarb, chairman of the NASD, speaking at the National Press Club in Washington, said an IPO would allow the NASD to raise funds to grow and continue to modernize. In the past few months, the NASD has given an impression of where it sees itself growing.

On the international scene, it formed Nasdaq Japan, while it continues to look at alliances with international markets in China and European and Asia Pacific countries. On the domestic scene, the NASD said it is interested in creating an electronic futures contract business.