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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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April 30, 2002

ADF vs. SuperMontage in ECN Scrap

By Staff Reports

The Alternative Display Facility will be a chump that won't be in the same class as Nasdaq's SuperMontage, which, as now structured, will have unfair advantages.

These complaints come from various ECNs, which filed recent comment letters with the SEC. Bloomberg Tradebook, NexTrade and Instinet all sent letters arguing that letting ADF and SuperMontage charge similar rates will give Nasdaq a distinct advantage that could constitute a monopoly.

The rates will be similar, but the quality of service will not, the ECN officials said. SuperMontage will be able to offer data revenue sharing agreements to market participants. The ADF's inability to offer this service will mean that it will be easily outclassed in its competition with SuperMontage, the ECN officials wrote.

Market participants, they fear, would then be forced to use the SuperMontage, which the ECN critics have charged is rigged against them and in favor of market makers.

The complaints come amidst turmoil in the structure of the equity trading markets. ECNs especially are concerned that Nasdaq's SuperMontage could hurt them though some do see a positive side. One possible benefit for ECNs is the ability to publish their quotes on New York Stock Exchange-listed stocks via the ADF.

In anticipation of the ADF's launch, the National Association of Securities Dealers is sending forms to ECNs requesting estimates of their potential trade volume during the first 90 days of the ADF's activation. The NASD is also reportedly pressing participants to pay user fees in advance.