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January 1, 2003

At Deadline

By Editorial Staff

SuperMontage

*SuperMontage is improving Nasdaq trading. That's according to new statistics from Nasdaq and interviews with Nasdaq executives and market makers. Nasdaq's new system, which now trades all 3,900 of the market's securities, has produced greater depth, faster executions and higher fill rates. "It's working just like Nasdaq intended," said Jim Miller, head trader at Robert W. Baird & Co. "It's much easier to hit and take stocks. And we're seeing a lot more size." That's because traders are placing more of their orders in reserve than they were under SuperSOES, according to Miller and Nasdaq data.

Traders use reserve more often because of better functionality on SuperMontage and a fear of missing trades, say sources. This increase has caused depth to double around the inside in some of the most liquid names, according to Nasdaq data. Traders accessing that liquidity are able to execute large orders instantly at a single price rather than plod through multiple price levels. They get speedier executions at a better price, traders say.

SEC Chair

*The trading industry is eagerly awaiting Securities and Exchange Commission Chairman designee William Donaldson's confirmation hearings. Although Donaldson initially declined comment on any substantive topics, the industry is expecting action from the new chairman on a bevy of market structure issues. What will Donaldson, the former chairman of the NYSE, do about the continuing controversy over Amex trading of Nasdaq securities? What will he do about the requests for help from bleeding market makers? How will he approach the current Intermarket Trading System? The latter now preserves the monopoly of the specialists, some critics say.

Schwab

*Schwab Capital Markets, in a reorganization of its equities group, has revamped its compensation structure. Trading has been automated and reorganized along industry sector lines. "The place is almost unrecognizable," said Larry Liebowitz, who has run the equities division since late spring. Liebowitz has hired some 20 to 30 institutional sales people from Thomas Wiesel Partners. Schwab, which in recent months slashed the number of its traders, plans however, to bring in another group of 30 to 50 pros this year. With commissions of four to five cents, Schwab is also positioning itself somewhere between a full-service shop and an electronic agency brokerage.

The moves take place as Charles Schwab & Co. is trying to expand its institutional trading operations. It also comes at the same time that Marty Cunningham, head of Schwab Capital Markets' Nasdaq desk, was another casualty of the job cuts after running the desk for some five years. At press time, Schwab did not name a successor to Cunningham.

Wick

*Was Hardwick "Wick" Simmons pushed out the door by Nasdaq's Board or was he going anyway? Nasdaq's now lameduck chief executive was pushed out, according to several reports and industry sources, who said he alienated many board members. But Nasdaq officials, in dismissing these comments, insist it was all part of a plan that called for Simmons to only serve three years. The next Nasdaq chairman, said one market participant, needs to be someone who will bring "stability" to the marketplace. "We have been reacting too long. We have too many different rules and we have to take a leadership position," according to a Nasdaq trading manager.