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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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February 1, 2000

At Deadline

By John A. Byrne

Gramm Visit

Senator Phil Gramm (R-Texas), chairman of the Senate Banking Committee, is planning a "field trip" to the monied canyons of New York this month. Gramm, accompanied by committee members, plans to meet with securities leaders, the committee's spokesperson said. The tentatively scheduled visit would allow the committee to take feedback on pending securities legislation, the spokesperson said.

The most important bill is the Securities Market Enhancement Act (SMEA). Gramm still hopes to craft a bipartisan SMEA, the spokesperson said. "We'll just have to see how many issues the members can keep their eyes on," she said.

The spokesperson added that it is too early to say whether the Senate leadership will have time to work with the House and turn out an updated SMEA bill that President Clinton could sign into law. The congressional calendar for 2000 is filling up. The Senate leadership has several distractions, including their re-election campaigns, and the normally hectic presidential campaign season.

Canadian Merger

TD Securities, the Canadian brokerage owned by Toronto-Dominion Bank, will soon become a more formidable trading firm. The parent is acquiring CT Financial Securities in a deal valued at $7.8 billion Canadian dollars (U.S. $5.4 billion). CT Financial, the parent of CT Securities, operates a trading desk with some nine traders.

The desks at TD Securities and CT Securities will be merged under the current plans. TD Securities, which currently has six traders, would see its headcount more than doubling to 15.

The acquisition will mean a "substantial increase in our client base," said Nick Savona, vice president of international trading at TD Securities' desk in Toronto. Savona, whose desk executes Canadian-listed stock trades for U.S. brokerages, said the firm's new customers will have access to "one of the best research teams on the street."

Amex Lawsuit

Despite the possibility of a lawsuit by members at the American Stock Exchange to block Nasdaq's pending privatization, Richard Ketchum, Nasdaq's president and COO, is unfazed. "They have no legal basis," he told a gathering at a recent STANY-Nasdaq town hall meeting in New York. "It doesn't worry me." Nasdaq's future plans do not include the AMEX. That has angered some AMEX members who are counting on its 1998 merger with Nasdaq to reverse the ongoing decline in their equity listings. Ketchum said plans are proceeding for 130 major trading firms to take a 32 percent stake in Nasdaq and for Nasdaq to formally register as an exchange.

While Nasdaq is careful not to alienate some of its smallest members, it is probably happy to sever ties with thousands of them. "It makes no sense to have 5,500 members with little or no interest in the Nasdaq market," Ketchum said. Ketchum surprised some at the town hall meeting when he said that Nasdaq's supermontage proposal is a crucial component in its applicaton to become an exchange. "I was a little surprised myself," Ketchum said. "But the SEC wants to see some form of centralization in the market."

Instinet Online

Instinet is becoming serious about the retail market. The Reuters Group's subsidiary is planning to launch an online brokerage soon. The new online broker is called Instinet.com, according to a Securities and Exchange Commission filing by Reuters. The move was expected. Instinet previously made clear its intention to build a retail franchise.

Some experts note that the online brokerage market is already crowded. But Instinet, which executes a substantial share of institutional Nasdaq orders captured by electronic communications networks, may be able to capture more liquidity in some Internet stocks popular with online retail traders. The new unit plans to offer stock trading as well as provide mutual fund, credit card and other financial services. Meanwhile, London's Sunday Times reported that Reuters may sell as much as 25 percent of Instinet to the public, in a Nasdaq listed offering.