Momtchil Pojarliev
Traders Magazine Online News

Some Like It Hedged

BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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April 1, 2003

At Deadline



*Those earning fees from locked and crossed markets, a source of revenue today for some alternative systems, would be penalized under a proposal sent by the STA to the Nasdaq. John Giesea, STA president, in a letter to the chairman of Nasdaq's Unlisted Trading Privileges committee, wrote that the number of locked and crossed markets is alarming. "The existence of such market conditions causes significant confusion to the public investor, has a deleterious effect on the speed of execution, and generally disrupts the marketplace," according to Giesea. The STA called for new rules to end the practice.

The controversy over locked and crossed markets is much debated within the trading industry. Some officials of alternative trading systems have contended that, at times, they result in lower margins, benefiting the clients. Market makers have complained that they are hurting the market as it further fragments.

Market Structure

*One of Washington's most influential think tanks is going to become involved in the market structure debate. The American Enterprise Institute will hold a conference on the subject this spring, according to Peter Wallison, a scholar with the institute. "Market structure," Wallison told Traders Magazine, "has become one of the most important issues in the securities industry. We will discuss this along with SuperMontage and have multiple sessions on trading issues."

Wallison, who has written several papers on trading and securities issues, says he hopes that some Securities and Exchange Commission officials will be in attendance.

Pink Sheets

*Electronic trading has arrived on the Pink Sheets. Last month, the market-of-last-resort debuted Pink Link, an order delivery trading service for market makers. Pink Link lets dealers on both the Pink Sheets and its competitor, the OTC Bulletin Board, trade with each other via e-mail-like messages. It is similar to Nasdaq's SelectNet service and is meant to replace the telephone as a trading tool. Most trades in Pink Sheet and OTCBB securities are conducted over the phone. Pink Link arrives as Nasdaq prepares to replace its OTCBB marketplace with BBX, an electronic trading platform.

Pink Link is available to all market makers using Pink Sheets' OTC Dealer quote update platform. The number of traders using that service numbers "in the hundreds," according to Cromwell Coulson, chief executive of Pink Sheets. At presstime, Pink Link was only handling securities beginning with the letter "A." Still, dealers seemed pleased. "We haven't had any problems with it," said Ronnie Schwartz, head OTC trader at Schwab Capital Markets.


*The compensation structure for institutional research sales pros at Salomon Smith Barney is under review. The investment banking goliath, which pays these pros a salary and bonus, is considering a switch to a commission-only package, trading sources say. If enacted, Salomon's move would be motivated by the crimp in trading commissions. The switch would eliminate a major source of fixed overhead costs. Salomon's move would be significant because of its stature as a major league trading house. Jefferies, a third market player, recently adopted a commisson only package for research pros. A spokesman for Salomon declined to comment.