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.

Traders Poll

Would you feel better if the Chicago Stock Exchange were purchased by U.S. firm or consortium rather than a foreign one?




Free Site Registration

March 1, 2003

At Deadline

By Editorial Staff

Schwab

* Schwab Capital Markets is executing more listed order flow internally. Larry Leibowitz, head of SCM's equities division, says SCM may reduce the amount of listed retail flow routed to its Boston Stock Exchange specialist unit or the New York Stock Exchange. The switch is part of a sweeping change in the way the giant wholesaler conducts business. Last quarter, Schwab fired practically its entire staff of about 250 Nasdaq market makers and assistants. It now processes most Nasdaq retail flow automatically. It may do the same with its listed flow.

"We are rolling out our automated trading and SmartEx technology for listed retail flow," Leibowitz said. "By making more stocks ourselves we will be able to better control the quality of our executions." Leibowitz notes that the SEC's new execution quality disclosure rules have forced trading houses to devote more resources to improve fill speeds and prices. Schwab is trying to determine if it gets better fills in house or on exchanges.

Primex

* Primex, Nasdaq's electronic auction system, is no longer a pilot but has been granted permanent status by the regulators, an approval that its supporters hope will mean it can become a successful enterprise. Nevertheless, despite SEC approval, the system continues to have its doubters. "Volume is not significant," said one Nasdaq trader of Primex. "It's not getting the volume that it needs," said another trader. Still, Nasdaq officials said the regulatory approvals combined with recent improvements will lead to success for the electronic auction system. "We look forward to enhancing its value," said Dean Furbush, executive vice president of Nasdaq Transaction Services.

Routing

* Helfant Group, part of Jefferies, has taken over much of S.G. Cowen's electronic order routing business. Until December, Cowen operated a routing network used by regional stock exchange specialists to layoff positions on the New York Stock Exchange through DOT. Cowen dropped that business when it ceased trading as a regional specialist in December.

Helfant, best known as an NYSE floor broker, operates its own routing network for hedge funds, broker dealers and other pros. Helfant hired four Cowen execs based at the three remaining floor-based regional exchanges in Philadelphia, Chicago and Boston. It did not take any Cowen terminals or routing technology. There was no asset transfer, says Helfant managing director Gary Esayian.

History?

* Archipelago is in the process of transferring its Nasdaq orders to its own exchange, a move that Archipelago officials estimate will save it millions of dollars in SuperMontage access fees. It is part of the continuing competition between Nasdaq and Archipelago, which bought the Pacific Exchange in October 2001. Indeed, Archipelago, along with other ECNs, may be in the process of taking away so much liquidity from Nasdaq that these players will eventually bring down the SuperMontage, some pros suggest. A Nasdaq spokesman says no.

"We're merely in the process of talking to Archipelago about connectivity issues," said the spokesman. And that, he added, means facilitating orders either way. Nevertheless, several market makers said that, if Nasdaq keeps losing huge amounts of liquidity, and millions of dollars in fees, then, "SuperMontage and probably Nasdaq will be history."