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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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August 31, 2002

Wall Street Peeping Toms Targeted by Big Board

By Peter Chapman

The New York Stock Exchange is expected to soon launch its Anonymous SuperDOT order routing service.

ADOT will allow an institutional trader to route an order via SuperDot, without notifying the sponsoring broker until late in the day. The service is intended to alleviate the fears of some on the buyside that their brokers are peeking at their orders and trading on the information.

ADOT is currently in beta testing, according to sources. The Big Board will not say when it will be ready.

Institutional traders call ADOT a step in the right direction - but a small step, unlikely to add much value. Some say they already have fairly anonymous DOT access through ECNs. "The ECNs don't have the manpower to sit there and watch what we're doing," said John Wheeler, the director of equity trading at American Century. "So, in a sense we've had Anonymous SuperDOT for years."

Others say DOT is now less important since decimalization. Displayed liquidity has dried up as traders try to avoid being "pennied."

"It isn't nearly as effective a tool as it was prior to decimalization," noted Kevin Cronin of Aim Advisors.

Another said he wouldn't use the broker anyway if he thought it was peeking at his orders. "If I'm using a broker and I'm worried, then I shouldn't be using a broker," said Jamie Atwell of Nicholas-Applegate. "There are enough alternatives."

Still others maintain DOT details transmitted at the end of the day can still be valuable. The order may be only partly executed. "That's still plenty of time to do some damage," said Brian Pears of Victory Capital Management.