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Traders Magazine, February 2001

John A. Byrne

Archipelago Exchange, the all-electronic stock mart, is feeling the heat from critics. Nasdaq contends that the exchange, run as a joint venture between the Archipelago ECN (ARCA) and the Pacific Exchange, avoided serious scrutiny by filing a rule change, instead of a much meatier exchange registration with the Securities and Exchange Commission. Exchange registration would have required Archipelago to provide ownership and financial information.

Another critic, Knight Trading Group, said it is concerned about Archipelago's plan to charge access fees. Dealers have been at loggerheads with ECNs over access fees since the introduction of the order handling rules. Knight also attacked Archipelago for requiring firms to use ARCA's affiliated broker dealer, WAVE. Knight contends that puts Archipelago in a conflict of interest. Archipelago is planning to make a formal response soon to Nasdaq's and Knight's comment letters to the SEC.

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