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An Explicit Endorsement

Traders Magazine, May 2002

John A. Byrne Editor

A good case for explicit commissions on institutional trades was made by a veteran buysider. Explicit commission, or agency style trading on Nasdaq, will benefit the institutional investor, according to Tom Bardong, head of trading at Alliance Capital Management. Dealers will initially reap the rewards, but then will ramp up market making in small- to mid-cap stocks. Later, the dealers will take a fresh look at expanding their galaxy of larger names. "Firms will once again build up research and expertise in both small- to mid-cap names," Bardong said. "In the past the cost of carrying these names did not justify the amount of resources a dealer was committing." The shift to commissions will also, indirectly, encourage dealers to risk more capital for institutional accounts on large-cap stocks. Dealers will be handling an expanded universe on a more profitable basis, according to this Bardong.

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