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November 1, 2002

Snub: STA Shut Out of Hearings: A Shocked Trade Group Does Not Make the VIP List

By Gregory Bresiger

There are two interesting and possibly controversial Securities and Exchange Commission hearings taking place this fall, but they will both possibly lack something - vital industry voices. Neither representatives of the trading industry's biggest broker dealer group nor an institutional trading group were on the panel as the SEC holds two hearings on market structure. One hearing was schedule for late October, another for mid-November.

"I'm shocked and disappointed. We asked to be part of the panel," said John Giesea, president of the Security Traders Association. A spokesman for the Securities and Exchange Commission said "we were allotted a limited amount of time to discuss a broad range of issues. It would have been difficult to accommodate everyone in these initial hearings."

An SEC source was surprised by the reaction of those who weren't included. "No issue will be hammered out. These hearings will be more to explore issues than to settle them," the SEC source said.

A spokeswoman for the Securities Industry Association said the group was not upset by not having a representative on the panels. "We weren't invited, but we do understand the reasons why. There were lots of people they could have chosen to sit on these panels," she said. The spokeswoman added that the SIA will likely come up with a white paper on market structure sometime later this year.

The market structure hearings were set for Oct. 29 at the Securities Exchange Commission's headquarters in Washington and on Nov. 12 at the New York University Stern School of Business in New York in lower Manhattan. Both hearings address the same subjects, which include, the collection and dissemination of market data through intermarket plans, the broker dealer's obligations to obtain best execution, trade-throughs, price protection and the role of national securities exchanges.

Other topics that cause some fireworks at most conferences - the SEC's hearings are no exception - are the self-regulatory system, alternative trading systems and electronic communications networks. But the hearings may have started on the wrong foot.

"We were told by the SEC that no associations would be on the panels but the first person I see listed on the panel is a member of an association," Giesea said.

Giesea was referring to John Markese, president of the American Association of Individual Investors. Others included on the agenda are representatives of the Vanguard Group, one of the largest retail fund groups, Tom Gardner one of the founders of the Motley Fool, several academics and Richard Ketchum, president of Nasdaq as well as Ruben Lee, Oxford Financial Group, Robert Murphy, NYSE specialist, LaBranche & Co. and David Whitcomb, president and CEO of Automated Trading Desk.

Although the STA will have no official representation, Bernard L. Madoff, one of the STA's leading members will be on one panel. The panels will also have a representative of a large ECN, Ed Nichol, chief executive of Instinet.