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Spoofing, Surveillance and Supervision

Jay Biondo, Product Manager - Surveillance at Trading Technologies, co-authored an article along with James Lundy and Nicholas Wendland, both of Drinker Biddle & Reath LLP, reviewing the CFTC's regulations and expanding efforts, 21st century surveillance and supervision, as well as strategic recommendations.

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July 31, 2000

Can Tradepoint Fly in the U.S.?

By Staff Reports

Tradepoint Financial Network, the London-based electronic stock exchange authorized to offer direct trading from the U.S. in stock orders for European issues, has a herculean task ahead.

Last month it received a no-action letter from the Securities and Exchange Commission, making it the first foreign stock exchange offering direct trading from the U.S.

But some traders in the U.S. don't think the plan will fly.

"It will have zero impact," predicted Chris Amato, a foreign equity trader at International Assets Advisory Corp. in Winter Park, Fla. "It will allow some market makers to be more active in London stocks, but there is no true advantage in using it."

Officials from Tradepoint did not return telephone calls seeking comment.

Low Volume

To be sure, some foreign stock traders in the U.S. see Tradepoint as competition but others think even that is a remote possibility. That's because of Tradepoint's low volume, hovering around $100 million in value, which means liquidity, the lifeblood of competition, is a concern. In practice, Tradepoint is not unlike a humble electronic communications network struggling for global recognition.

Tradepoint, owned by a consortium that includes Instinet, ABN Amro, J.P. Morgan, Merrill Lynch & Co. and Morgan Stanley Dean Witter, is not discouraged. The exchange plans to adopt a new name virt-x. In Europe, Tradepoint formed an alliance with the Swiss stock Exchange to bolster its European operations. Under the arrangement Tradepoint will use the Swiss exchange's electronic trading system.

The electronic exchange recently added about 230 continental European equities. Tradepoint said additional stocks will be added later. It currently supports trading in all the major European indexes.