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Why Do Exchanges Own Multiple Licenses? It's Not Hard To See, Look at the SEC

In this recent research note, Sandler O'Neill + Partners, L.P. Principal Richard Repetto examines why the public exchange operators hold multiple licenses and that rationale behind this phenomenon.

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January 1, 2003

Another Round of Layoffs in Trading

By Peter Chapman

SG Cowen is winding down its trading activities in Chicago.

The unit of French bank Societe Generale will cease to operate as a specialist on the Chicago Stock Exchange. Cowen will also exit options trading at the Chicago Board Options Exchange. The decision will result in about 25 layoffs.

The move follows SG Cowen's sale of its retail brokerage business to Lehman Brothers about two years ago. Both the latest layoffs and the sale reflect the parent's plan to focus exclusively on investment banking as well as sales and trading services for institutions. CHX specialists largely process retail order flow. The bank bought Cowen & Co. in 1998 for its research and banking expertise.

Cowen cannot completely shake its retail past. Both Cowen and Lehman are expected to pay up to $100 million in restitution to customers allegedly defrauded by rogue broker Frank Gruttadauria. Gruttadauria worked at both firms.

Cowen is a relatively small specialist at the CHX, ranking seventh by number of securities traded, according to the exchange. As of last April, it traded 82 listed names. Cowen has a long history on regional exchanges. It also provides a routing service to other specialists looking to lay off positions on the New York Stock Exchange.

Most CHX specialists have been hurt by the loss of the retail investor during the bear market of the past few years and the introduction of penny increments. Two top specialists, Dempsey & Co. and Chicago Securities Group, have been sold. Dempsey is now part of E*Trade. CSG is a unit of Automated Trading Desk.