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April 1, 2000

At Deadline

By John A. Byrne


Despite the blaze of publicity for Aeroflex, the first stock since 1939 to be voluntarily delisted from the New York Stock Exchange, the stock does not seem to have triggered fireworks in Nasdaq trading. The microelectronics manufacturer, trading under symbol ARXX, took advantage of last summer's loosening of Rule 500 by the Big Board to switch to the tech-heavy Nasdaq. Market makers seem vaguely disappointed ARXX doesn't trade more actively. The average daily volume since its March 21 debut on Nasdaq is about 600,000 shares. That's comparable to the average 270,000 Aeroflex shares traded daily for the past year on the Big Board. The two-fold increase is attributed largely to dealer-to-dealer transactions on Nasdaq. The price on Nasdaq recently dropped eight points to $41 a share, trading within a range of about $5 to $7.

"Trading is a little thin," one trader confided. "I think that's because there's not much sponsorship at the moment. No one has any loyalties to the name." ARXX is considered something of an orphan. The stock lacks the robust sales and trading support that accompanies a strong IPO or secondary offering. Neil Richard, a trader at institutional shop Brean, Murray, is a little more upbeat. "Sometimes it moves on very little volume until it finds a level where people have business to do. Then it will stabilize for a while," he said. Top market makers in ARXX are CIBC Oppenheimer, WIT/Soundview, and Merrill Lynch. Morgan Stanley Dean Witter, which picked up the stock, is expected to be a force.


Bill Lupien will assume a more hands-on role in running OptiMark. Lupien, who had a recent bout of illness, arrives on the scene as volume on OptiMark hits new lows, an estimated 100,000 shares on some days. At its peak in 1998, OptiMark's volume reached as high as 1.5 million shares daily. A connection to Nasdaq that could boost volume is reportedly on hold because of a dispute with electronic communications networks. Last December, the 390-person company fired about 50 staffers and followed later with more pink slips.


OptiMark's struggle is not unique. Jefferies & Co. has temporarily shuttered @Harborside, the firm's web-based institutional trading system. The firm is hoping to relaunch @Haborside in the coming months. The system, launched with great expectations by Jefferies in May last year, facilitates block trading, matching indications of interests among anonymous institutional buyers and sellers. Lack of liquidity spelled the end of a seven-month struggle for block transactions. At its peak, @Harborside was facilitating trades in the 20,000- to 400,000-share range.

A successful relaunch hinges on a plan by Jefferies to attract a critical mass of liquidity. Richard Holway, the former buy-side trader who conceived of the @Harborside concept and ran the operation, offered no details. But he suggested in a brief interview that an enlarged sales force would be helpful. A spin-off for @Harborside is possible, although the firm would likely retain a significant ownership stake, according to a Jefferies spokesman.

Power Brokers

With the firm's volume topping just over 1 million trades in a record-breaking Nasdaq and listed session one day earlier this month, Knight/Trimark Group's business is booming. The firm is shifting management with founders Ken Pasternak and Walter Racquet taking new responsibilities. Pasternak remains as president and chief executive of Knight/Trimark and Knight Securities. But he sheds his role as head of Nasdaq trading. That responsibility will be handled by the duo Randall Taylor and Scott Littman. Raquet, executive vice president and chief operating officer of Knight Securities, becomes chairman of Knight International. He will seek to develop opportunities overseas.

Meanwhile, Knight/Trimark appointed David Shpilberg chief operating officer, chief technology officer and executive vice president. Shpilberg, who steps into a newly-created post, comes from Ernst & Young, where he was the chief technology officer. He will play an active role as Knight spends heavily on technology for electronic trading, information management and global systems integration. The firm said it plans to spend $100 million on technology projects over the next 18 months.