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September 30, 2001

At Deadline

By Editorial Staff

Acquisitions

*In the wake of a disastrous market, Jefferies Group may be about to launch an acquisition program. A spokesman for the firm said Jefferies will continue to look for new properties if the price is right. Recently, Jefferies bought Lawrence Helfant LLC, the largest independent broker on the New York Stock Exchange. Jefferies will merge Helfant with its floor brokerage subsidiary, W&D Securities. The merged entity, which will be known as the Helfant Group, will continue to operate as an independent company.

"We have electronic connectivity to Helfant through the handheld devices," according to John C. Shaw, Jr., president of Jefferies. "We are able to get much better looks for our customers and also get better service for our customers on execution." Helfant posts some 2.5 percent of total Big Board volume. It trades some 13 billion shares annually and it earns about $50 million a year, according to Jefferies officials.

Short Sale

*The Securities and Exchange Commission is reportedly close to relaxing the restrictions of its short sale rule for the most actively traded listed securities. If it does, block traders could find more opportunities to sell short. The change could remake SEC Rule 10a-1 along the lines of the NASD's Rule 3350, which governs the shorting activities of Nasdaq traders. The SEC's rule prohibits listed traders from selling short when the last sale occurs on a down-tick, or at a price lower than the next-to-last sale.

The NASD's rule bars traders from shorting only if the last best bid is lower than the next-to-last best bid. Because bids, apparently, change less frequently than trades occur, Nasdaq traders have more chances to short. Block traders welcome any relaxing of the rule, but some believe the SEC should go further. "You should have the ability to hit minus-tick bids," said Barry Small, chief executive and head of listed trading at Weeden & Co.

AZX Sale

*With no revenue and no profits for the past few months, the Arizona Stock Exchange is discussing a merger or purchase, said Steven Wunsch, the exchange's president and chief executive officer. Wunsch said the Arizona Stock Exchange has not been profitable and has had no revenue for several months. He added that the exchange, one of the early automated trading markets, has been on the block for the last half year. Wunsch said the AZX is in discussions with other electronic markets.

A number of firms will be watching and monitoring these negotiations. Some of Wall Street'e heavy hitters have put money into the Arizona Stock Exchange. Among those investing in it are J.P. Morgan, Goldman Sachs, Chase and Credit Suisse First Boston. However, Wunsch conceded that, despite these cash injections, the exchange still hasn't been able to achieve "critical mass." Wunsch has been also looking for a large ECN partner or from help from the Nasdaq or the NYSE.

Knight Trading

*Knight Trading Group will lease out its newly built world headquarters rather than move into it by the end of the year as originally planned. Financial pressures and the need for space by companies displaced by the World Trade Center disaster are behind the move, according to the company. At 260,000 square feet, the building is more than double the size of Knight's current headquarters of about 100,000 square feet. Construction was announced in May 2000 when Knight's prospects seemed boundless. "We see no end in sight for growth in both U.S. equities and options," Knight's chief financial officer, Robert Turner, said at the time. Knight's headcount proceeded to balloon from about 1,000 then to 1,400 today. Recently, though, Knight has begun to cut back. The market maker is "stepping up our efforts to control expenses and continuing the ongoing evaluation of our cost structure," Kenneth Pasternak, Knight's chief executive said.