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December 1, 2002

Another Big Player Takes Direct Access

By John A. Byrne

Fidelity Investments is finalizing plans for a campaign that will promote the company's new-fangled power as a direct access broker.

The company wants to introduce direct access technology by mid-2003 for listed and Nasdaq customers of Fidelity's Institutional Brokerage Group. That includes Fidelity's own correspondent brokers.

"We'll offer it to our registered investment advisors and we will use it ourselves," David Denison, president of the group, told Traders Magazine. These RIAs who contract with the group for various brokerage and clearing services. "We will also use direct access within our capital markets unit," added Denison.

Denison said Fidelity will employ the resources of its specialists on the floor of the Boston Stock Exchange and has access to the New York Stock Exchange. "The quality of the trading statistics on the Boston are excellent," he added.

The push by Fidelity comes as the direct access business is joined by other major players. It also comes as Fidelity tries to gain market share in the correspondent clearing business, an industry which is noted for cut-throat price competition. "There are just over 90 clearing firms in the business but a lot of them don't have our open architecture approach," Denison said.

That's one good reason Fidelity is busy, according to Denison. He said Fidelity, as of Sept. 31, had 170 correspondents, a 10 percent increase since the beginning of 2002. Fidelity's Institutional Brokerage Group reported average daily listed and Nasdaq trade volume of 158,132 trades in September.