Commentary

David Weisberger
Traders Magazine Online News

Stop the BS & Promote Real Transparency!

In this shared blog, David Weisberger says a recent WSJ article is wrong and that traders do need to purchase faster and more comprehensive market data to avoid being fined for violating "Best Execution" obligations.

Traders Poll

Is information leakage a major concern of yours when you trade?



Free Site Registration

September 30, 2003

At Deadline

By Editorial Staff

Knight

* Knight Trading Group is going to win a pending arbitration and will be cleared of all charges of front running, a source who is a party to the arbitration told Traders Magazine. "The NASD and the SEC are going to clear Knight of all the charges. They are finding nothing," the source said. He also predicted that the arbitration would end late this year or early in 2004. Knight CEO Thomas Joyce, at an analyst meeting earlier this year, would only say that the firm continues "to work with regulators" on front-running charges brought by a former executive. Robert Stellato, the former head of Knight's institutional trading desk, alleged that Knight officials executed orders for their own accounts before filling client orders. He also contended that Knight officials were informed of these illegal practices, which could potentially cost clients trading profits. NASD and SEC officials don't comment on pending arbitrations.

Late Trades

* Regulators and law enforcement officials apparently have just begun their investigation of some shady trading practices of the mutual fund industry. In a series of investigations that are expected to continue at least into next year. Regulators have been conducting investigations into trading practices at Janus Capital Group, a huge fund complex, Strong Capital Management, another investment company, Canary Capital Partners, a hedge fund manager, and Alliance Capital, among others.

Canary, for example, recently paid a $40 million fine for questionable late trading. According to regulators, the hedge fund manager received a preferred daily price from a broker. That's even though trades were made after 4 p.m. when the following day's closing price should have been assigned.

NYSE

*What will be the effect on markets of the unexpected departure of Richard Grasso as chairman of the NYSE? Several traders and industry executives say the pace of market reform will be expedited. This will mean that the exemptions on the trade through rule will be expanded beyond EFTs to other listed products, ITS reform will be back on the SEC's agenda and that Nasdaq's Form One will likely be extended, they predicted.

"Market structure reform will move faster now," said Michael Dorsey, executive vice president and counsel for Crown Financial Group. "Opposition to many of the Nasdaq's proposals will now be lessened with the departure of Grasso." This is a sentiment shared by many in the industry, including Grasso's most bitter critics. Archipelago head, Gerald Putnam, said that Grasso's resignation will mean ITS changes will now be discussed again.

Trade Costs

* It is a "fallacy" to think that trade execution costs have gone down in the past three years. Execution models are now more complex and that drives up execution costs. Those are some of the conclusions of a study by the TowerGroup. "Execution costs," according to the report, "have reached a point where they have become less significant as standalone numbers, but must be considered in terms of value, risk, mitigation, and level of indispensability to workflow patterns." Miranda Mizen, the author of the TowerGroup report, "Robbing Peter to Pay Paul," argues that the percentage of technology budgets by broker dealers on execution-related costs has been on the rise. Mizen studied execution costs in a three-year period between 2000 and 2003.