Commentary

Jared Dillian
Traders Magazine Online News

Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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November 1, 2002

ArcaEx Becomes EFT Electronic Strongman

By Peter Chapman

ArcaEx is up now that Island is down.

The new electronic stock exchange has doubled its share of the market in the most heavily-traded ETFs since its rebellious competitor "went dark." A good chunk of the volume in the exchange-traded funds, known as the QQQs, SPDRs and Diamonds, has left the Island ECN in the wake of its decision to pull its quotes from public view in late September.

Island's move was a response to an ultimatum from the Securities and Exchange Commission either to post the quotes in the Consolidated Quotation System or not post them at all. Island snubbed the CQS to avoid the related obligation of having to route away certain orders to slower-moving competitors.

Although Island is still trading the ETFs in a blind matching environment, ArcaEx has won order flow from those traders who want to see what they're doing.

"People like transparency," Mike Cormack, president of Archipelago Holdings, told the crowd at the Security Traders Association annual conference. "Our market share has increased pretty dramatically since Island went dark."

In the second week of October, the exchange, formed by Archipelago and the now-defunct Pacific Stock Exchange, claimed a nine percent share in the QQQs. That was on 44 million shares. It also recorded eight percent in the SPYs on some 28 million shares and 13 percent in the DIAs on about 13 million shares. The mutual fund-like products are among the exchange's top ten traded securities as measured by volume, said a spokesperson for Archipelago.