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Jared Dillian
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Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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January 1, 2000

At Deadline

By John A. Byrne

OptiMark

It wasn't a Merry Christmas at OptiMark Technologies. The supercomputer matching system for institutional traders said it was planning to hand out more pink slips in the New Year. The reduction follows an earlier cutback of 54 jobs, or roughly 14 percent of a 389-person workforce. The retrenchment comes as OptiMark's average daily trading volume dipped to as low as 285,000 shares, having reached a high of 1,150,000 last September. In recent months the volume has climbed back down to 716,000 shares daily.

Philip Riese, chief executive of OptiMark, said the job cuts are not directly related to the decline in trading volume. Rather, they are attributed to an "expense management" review that was begun in the fall of last year. Riese said it is important to run a "lean and mean shop."

Wild West

As New York newspaper publisher Horace Greeley intoned, "Go West, young man." Well, that's exactly what Nasdaq may be doing later this year. According to Nasdaq spokesman Scott Peterson, the exchange is studying the idea of opening a high-tech complex in Silicon Valley that would feature market updates, a public information center and conference rooms for companies to hold press briefings and shareholder meetings. The facility would be similar to Nasdaq's MarketSite that opened this month in New York's Times Square.

Nasdaq has had a sales office in Silicon Valley since 1990, while the New York Stock Exchange arrived on the West coast only about two years ago. The Big Board is getting tired of being snubbed by big technology companies that launch their IPOs on Nasdaq. The Big Board is spending millions of dollars on a state-of-the-art, virtual trading floor that will be located in Palo Alto, Calif. NY West' is scheduled to open by March 2000. The goal is to attract IPOs that meet its listing requirements as well as lure large tech companies away from Nasdaq. Nasdaq plans to counter the Big Board's Silicon Valley campaign with an effort to spread the word to NYSE firms that they now have a choice of where to list.

Defection

Rob Cofer, former head of trading at Stifel Nicolaus in St. Louis, led a mass defection of traders and support personnel to cross-town rival Huntleigh Securities. He runs the new Capital Markets Group at Huntleigh as a senior vice president and head of Nasdaq trading.

The group is staffed with three former Stifel traders, or about a third of the desk's headcount, including Bill Riley, senior vice president and manager of listed trading; Steve Menendez, Nasdaq trading; and Christine Arnold, listed trading. Greg Lemasters, previously a position trader at Stifel, was tapped to replace Cofer and head up its trading desk.

"We are going to serve what we feel is an under serviced area of investment banking: deals between $5 million and $30 million," Cofer said. The new group will focus on value investing, healthcare and regional situations. "We want to follow things that are in our backyard that people aren't really paying attention to," Cofer said.

Super Times

With the successful debut of its new MarketSite video screen on Times Square, Nasdaq faces a challenge on a decidedly different front. But chances are reasonably good that the Nasdaq super montage trading system will become a reality this year. The dealer community is generally in favor of the proposal though some traders are concerned, among other things, that the Nasdaq trading platform will not be strong enough to support the system. On the opposite side are some officials at ECNs, including Bloomberg Tradebook and NexTrade, who strongly oppose the proposal.

If approved by the Securities and Exchange Commission as currently constituted, the system would aggregate customer orders at various price levels in a "super montage." Dealer and ECN participants would have anonymity and automatic execution on a Super SOES. Some pros say the system could see Nasdaq hurting ECNs, by allowing Nasdaq to directly execute a larger proportion of limit orders on dealer-to-dealer business. The Security Traders Association urged that the full roster of Nasdaq stocks, starting with the top tier, be slowly integrated into the system.