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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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June 30, 2001

Another Smart Order Routing Contender

By Peter Chapman

LaBranche, which recently bought Internet Trading Technologies (ITTI), is vying to become a force among broker dealers offering direct access to market centers.

"The execution process is becoming more commoditized," said Michael LaBranche, chief executive of the New York Stock Exchange specialist. "Technology will drive everything. This is a good way for us to link ourselves closer to our customers."

ITTI's year-old Universal Trader is an electronic routing network used by small and mid-sized broker dealers and institutions to route orders to market makers and exchanges. Early endpoints were Nasdaq dealers Knight Trading Group and Herzog Heine Geduld. (see Traders Magazine, April 2000).

The $2 brokerage division of LaBranche subsidiary Henderson Brothers has been using Universal Trader, offering institutional customers direct access to the NYSE floor.

LaBranche plans to offer electronic access to the customers of its recently acquired Robb Peck McCooey Clearing division. Rival Spear, Leeds & Kellogg's clearing division has had success with its REDIPlus direct access product. Universal Trader will not interface with LaBranche's specialist operations, according to the firm's chief executive.

However, Putnam Lovell Securities analyst Cathy Boucher contends LaBranche's principal reason for buying ITTI was to steer more order flow to NYSE brokers and SuperDOT.

Michael LaBranche says the floor is a likely destination but adds ITTI customers are free to direct their orders to any market center they select. ITTI is reworking the system to offer so-called smart routing functionality that scans market centers for the best execution.

Direct access is getting a big push these days from agency brokers. Instinet, ITG and Charles Schwab have been using it since last year. LaBranche is technically not an agency broker, but does execute most of its trades on an agency basis. "This is the next step in bringing people closer to the point-of-sale through technology," LaBranche said. "It's an extension of our existing business." ITTI charges on a per transaction basis.