Commentary

Jared Dillian
Traders Magazine Online News

Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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November 1, 2001

At Deadline

By Editorial Staff

Stock Futures

*Full-scale trading in single stock futures will be delayed, two House chairmen announced in a letter to regulators. The Commodities Futures Trading Commission had been pushing for retail trading of single stock futures by late December, but two House chairmen, in the letter noted that while they had looked forward to broad and deep markets for single stock futures on Dec. 21, "the events of Sept. 11 appear to have rendered this unlikely."

Representative Michael Oxley, chairman of the House Financial Services Committee, and Representative Larry Combest, chairman of the House Agriculture Committee, wrote that "the destruction of trading floors, data processing facilities and communications infrastructure have required that many of America's largest and most important market participants divert substantial time and resources to rebuilding their systems." The letter was sent to the SEC and the CFTC.

Oxley and Combest were responding to pressure from the industry. On October 10, the heads of the Securities Industry Association and the Futures Industry Association wrote to Oxley, saying a launch of single stock futures trading prior to the end of March 2002 was "unrealistic" because of problems stemming from Sept. 11.

Anthrax

*Brokerage firms are now screening suspicious mail for anthrax. Merrill Lynch, for example, is X-raying all incoming mail. There was a scare last month at Jefferies & Company in Jersey City. The firm, which received an envelope with a white powdery substance, immediately contacted health authorities.

At press time, preliminary tests indicated that the powder was not anthrax nor any other hazardous substance. "We are operating normally at Jefferies," a company spokesman said. "On the advice of the health department, no one is seeking individual testing unless the symptoms show up."

STA President

*John C. Giesea, a former Security Traders Association Chairman, has been choosen as the group's new president, replacing Lee Korins. Giesea will also add the additional title of chief executive officer beginning in February. Giesea has had a long and varied career in the securities industry going back to the 1960s. He has worked for Advest and Kidder, Peabody. Giesea said the trading industry must learn to accept dramatic changes. "Some of them, such as decimalization, have put a significant squeeze on industry profits. The industry must adapt to these changes in a way that provides fair opportunity for profitability, while enabling our members to continue to do their jobs effectively," he said.

SuperSOES

*Nasdaq's new quoting and trading price structure for the SuperSOES execution system is precipitating some complaints. The SuperSOES price changes are expected to result in lower overall costs for ECNs and marker makers under a new multi-tier price schedule being phased in through Dec. 3. The first round brought few complaints. However, some ECN officials are now saying that the reforms will lead to higher transactional costs for investors. They also complain that they will also cause more internalization and payment for order flow, as well as liquidity fragmentation.

Another round sees Nasdaq paying a rebate of $1 per 1,000 shares to NASD members that send trades, bringing liquidity via SuperSOES executions that do not charge an access fee. Nasdaq also envisages cutting NASD members a portion of tape revenue generated when they print non-Nasdaq system trades on Nasdaq. The NASD filed the changes with the Securities and Exchange Commission in late September. They were part of a pilot program that was granted automatic approval. Still, market players can challenge the automatic approval if they can prove the changes are harmful to the industry.