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November 1, 2002

Working It Out In Boca

By John A. Byrne

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  • Working It Out In Boca
  • Page 2

The memory lingers, and sometimes it casts a disturbing shadow, soon after the annual STA conference is over. The crowd departs in exhaustion, looking for solutions. It happened, once again, at this year's confab in the tony playground of sunny Boca Raton. A unanimous voice on the controversial issues - market structure, trading technology and regulation - is not what this interesting conference is about. Some might say it's about golf and a wee bit of adult beverage. Sure, but it is also about robust debate and the answers to the pressing issues: market fragmentation and getting some honest-to-goodness executions for institutional and retail investors. But if the crowd was expecting to find the Holy Grail, it might have had more luck getting a listed ITS execution on some second-rate ECN. At one session, Seth Merrin, innovator of the black box Liquidnet, took a stab at what's wrong. The markets are nowadays designed to satisfy the retail investor while serving the needs of the institutional community. This approach is impossible, he said.

It is not surprising then, that traders are worn to a thread by the rapid pace of change. They are worn down when, in reality, their lives should be much simpler. But it can't be simple when there are dozens of ways to skin a cat. It can't be simple in a market with dozens of order destinations. It can't be simple when there are agency orders here and riskless principal trades there. It can't be simple when the interpretations of what constitutes best execution cause blood pressure to rise. Oh brother! It can't be simple, when as Andy Brooks, the respected buyside trading executive from T. Rowe Price, remarked on one panel how some folks - get this - "are selling information prior to settlement." It's "unethical," Brooks snapped.