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June 30, 2000

London Dealers Frown on Call

By Peter Chapman

Nasdaq officials mulling an electronic call auction would be advised to confer with their counterparts at the London Stock Exchange before taking the plunge.

Like Nasdaq the LSE is a dealer market. And like Nasdaq the dealers on the LSE aren't crazy about technology that disintermediates their services.

The LSE has run a voluntary opening auction since 1997. It only handles about one percent of the typical day's shares, however, and is generally considered a failure.

Still, the LSE is plowing ahead with plans to implement a closing call in its primary SETS market. It will also offer two calls on SEAQ, its market for small and medium capitalized companies. That plan has been scorned by market makers. "We will end up with a two-tier, messy hybrid," one outraged dealer told a U.K. paper earlier this year.