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November 1, 2000

Supermontage Shootout At STA Boca Convention

By Staff Reports

Fur flew over Nasdaq's Supermontage proposal at the Security Traders Association's annual convention in Boca Raton.

William Gray, a buy-side trader at Capital Group in San Francisco, attacked ECN officials who say the Supermontage is anti-competitive. "If you want to compete with Nasdaq then become an exchange," he told Kevin Foley, president of Bloomberg Tradebook.

But Foley was undeterred. "We don't want to compete with Nasdaq," he replied. "We want to be members. Nasdaq was competing with us." Gray and Foley were on a panel that included Dan Franks, senior vice president of market operations at Nasdaq, and Matt Johnson, head trader at Lehman Brothers.

"ECNs are still second in the algorithm," complained Frank Masi, senior vice president of institutional trading at Instinet, who was in the audience. "There's still no price/time priority." Masi was not impressed with Nasdaq's eighth amendment to the Supermontage. The amendment would eliminate ECN access fees as a determinant in the pecking order of a quote.

Gray said he liked the Supermontage. "It's a good step in the right direction," he said. "Nasdaq should be the aggregator. Anything we do to centralize and de-fragment is good."

Amendment Eight also gives Supermontage users the choice of whether to view an ECN's prices with or without access fees. Johnson doesn't support that option. "Access fees should be incorporated in the prices," he said.

Johnson said that access fees should be eliminated. "You should be charged for using an ECN, but not for accessing liquidity," he said. Franks shot back, "We don't believe the charging of access fees should be a part of the Supermontage debate."