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May 31, 2002

TD Waterhouse Joins The Dealer Business

By Peter Chapman

TD Waterhouse is inching into the market making game.

The big discounter has established a Nasdaq dealing operation and become a specialist on the Boston Stock Exchange. A desk in Jersey City trades on Nasdaq as well as the Boston, via the exchange's Beacon Remote system. There is also a two-man operation on the Boston floor.

The broker trades only about 50 names in total, but is positioned for growth with a staff of 12 traders.

"We want to build it up very slowly in a very controlled environment," said Joe Barra, a TD Waterhouse executive vice president.

"We're not aiming to invest a lot of capital to get this started. There's an opportunity right now in the market to find quality traders," he added.

TD Waterhouse is the second e-broker in the past year to institute a dealing program. Last year, rival E*Trade bought Chicago wholesaler Dempsey & Co. The moves come against a backdrop of shrinking payments for order flow, low commissions and anemic retail volume.

In the first quarter, TD Waterhouse routed most of its orders to Knight Trading Group and Charles Schwab Capital Markets, according to the firm's Rule 11Ac1-6 report. But it did trade against eight percent of its Nasdaq orders and sent 11 percent of its New York Stock Exchange listed orders to the Boston.

Heading up the new operation is veteran trader Gene Wolfson. Running the desk is Tom Fasano. Both men previously ran Nasdaq market making for TD Securities, a TD Waterhouse sister company, during 1997 and 1998. That group was eliminated in a reorganization by parent TD Bank.