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December 1, 2000

Lattice Pushes Its Continuous Party : Taking On the Competition With New Campaign

By Peter Chapman

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  • Lattice Pushes Its Continuous Party : Taking On the Competition With New Campaign

It's one of the old est alternative trading systems, but also one of the smallest. Not satisfied with its size, the electronic crossing network Lattice has launched an aggressive campaign to boost its volume.

State Street Brokerage, a unit of State Street Global Management, itself a unit of Boston buy-side giant State Street Global Advisors, hopes to attract more institutional traders to its ten year-old system with a big marketing push and improvements to Lattice's functionality. The move is part of a broader effort by State Street Global Management to promote its GlobalLink platform. That technology supports Lattice as well as trading systems for foreign exchange and bonds.

"We are spending a significant amount of money," said Stephen Schoenfeld, senior vice president in charge of marketing at Lattice. "Especially now that Lattice is part of GlobalLink."

Schoenfeld was recently hired from the now-defunct ATS OptiMark. He spent several years as a manager of Lehman Brothers' New York Stock Exchange operations as well as running his own discount brokerage and a regional specialist firm.

Schoenfeld's hire comes as State Street goes through a major reorganization that left State Street Brokerage president Nicholas Bonn reporting to State Street Global Management executive vice president Stan Shelton.

The agency brokerage is "spending millions," according to Schoenfeld, to hire salespeople and wire Lattice to order management systems, electronic communication networks and Nasdaq market makers.

Observers say the company's move is long overdue, but it still faces trader resistance and a host of new competitors.

In addition to its three main rivals - POSIT, Instinet, and the New York Stock Exchange - Lattice faces increased competition from newcomers. A resuscitated Arizona Stock Exchange, NYFIX Millennium, Liquidnet and WOFEX are all vying for the same institutional block and basket trades.

"My job is to build an eco-system," Schoenfeld said. "That means bringing together a multitude of different types of clients. That will increase the chances of any one user finding a match."

Schoenfeld's problem is like that of the chicken and the egg. Traders won't use Lattice unless traders use Lattice. Liquidity begets liquidity.

Right now Lattice processes just 12 million to 15 million shares per day on average for about 100 buy-side customers. That's half the tally chalked up daily by rival POSIT and considerably less than that of the principal ECNs.

A Lattice sales team of five just a few months ago will climb to nine before the end of the year. Four sales traders will become six. "There are a lot of new faces here," Schoenfeld said. "We're hiring so many because we want to see volume increase. We've attracted people from ITG, BNY ESI and other competitors."

Lattice the system is being augmented as well. Schoenfeld intends to integrate it with all of the OMSs - about ten - used by the buyside. The buyside is now compatible with just a few. An agreement with Boston's Eze Castle will make the OMS vendor's TradersConsole product the default OMS for traders who don't have OMSs.