Commentary

Jared Dillian
Traders Magazine Online News

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.

Traders Poll

Would you feel better if the Chicago Stock Exchange were purchased by U.S. firm or consortium rather than a foreign one?

Yes

73%

No

4%

Doesn't matter to me

23%

Free Site Registration

June 30, 2000

At Deadline

By Select Reporter

J.C. Bradford

Most traders at Nashville's J.C. Bradford & Co. are jobless following PaineWebber's takeover of the retail brokerage, according to desk head Larry Elmore. Only three of 31 Nasdaq and listed traders took posts with PaineWebber. The rest have either departed or will leave after a summer-long transition period. The traders are part of a group of 550 J.C. Bradford employees, representing 55 percent of the workforce, that received pink slips in the wake of the $620 million deal.

Elmore, a 14-year veteran with Bradford, says he has had job offers, but has not made a career decision. Nasdaq market making is being transferred to PaineWebber's desk in New York. The big wirehouse chose to pick up only 90 of the 250 stocks Bradford traded.

Nasdaq trading was handled by eight senior principal traders; three intermediate principal traders; five agency traders headed by Lex Hudson; and two retail liaisons. The block desk included five senior sales traders; three intermediate sales traders; three senior retail traders; and two intermediate retail traders.

Wholesale Upheaval

Merrill Lynch & Co.'s acquisition of Herzog Heine Geduld, will be watched closely by Knight Securities, the largest market maker on Wall Street. Merrill will become the number two market maker, right behind Knight, after the acquisition is completed, probably in the third quarter. The deal was valued at roughly $913.8 million. The acquisition could potentially make Herzog a stronger competitor for Knight's order flow. The combo expands the overall number of Nasdaq and over-the-counter stocks in which Merrill makes markets, from 650 to more than 8,000.

Herzog, which will operate from its current address in Jersey City, will retain its name and operate as a distinct division within Merrill. Herzog's top commander, E.E. "Buzzy" Geduld, will remain at the helm. He will co-head global electronic equity trading with Merrill's Thomas Joyce. Geduld sees opportunities overseas. "With the backing of Merrill Lynch's enormous financial resources and outstanding leadership," he said, "we are ready to expand our services aggressively in Europe and in other global markets."

SelectNet Rival

SunGard is positioning its SunGard Transactions Network (STN), formerly B-Net, to compete with Nasdaq's SelectNet, according to SunGard senior vice president Bob Greifeld. Later this year - possibly as early as September - market makers will have the choice of using SelectNet or STN to hit each others' bids or take each others' offers. SunGard also plans to link STN to all electronic alternative trading systems.

STN is used now by agency desks to transmit their retail orders to market makers for execution. Greifeld says STN handles about 250,000 trades per day. The move against SelectNet would make it the third Nasdaq service to feel the heat of SunGard. STN currently competes against Nasdaq's Advanced Computerized Execution System, or ACES, for agency order flow.

SunGard's frontend UMA has proved a popular alternative to the Nasdaq Workstation II. Both allow dealers to manage their quotes and execute trades. Nasdaq is not sitting still, however. It recently purchased the popular Tools of the Trade frontend and plans to upgrade it to compete in the sell-side order management system market. SunGard's BRASS is dominant in that business.

STA Poll

A poll by the Security Traders Association raises some questions about payment for order flow arrangements. More than 65 percent of respondents favor a ban by the Securities and Exchange Commission on specific forms of order flow rebates. But only 44 percent are in favor of a total ban. Less than nine percent favor a ban on indirect payments for products and services.

"Payment for order flow has been a controversial issue and [its] resolution has eluded the SEC for years," said STA Chairman Robert King in a statement. "Perhaps the results of our latest poll can serve as a guideline in developing a position for the industry."

The poll, released at the STA's summer conference in Chicago, covered other topics including a central limit order book. More than 60 percent of respondents agreed that a CLOB would reduce or eliminate market fragmentation and protect investors.