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.

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April 1, 2004

At Deadline

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Reg T Fines

*Datek, iClearing, Ameritrade and Financial Services, LLC (Datek) all improperly extended credit to clients, violating federal securities laws, according to NASD. It has fined the firms $10 million. "NASD determined that the firms permitted cash account customers to purchase and sell securities in a series of trades without requiring full cash payment for each purchase in violation of Federal Reserve Regulation T," NASD said. The regulation stipulates that cash account clients must make full payment for each separate purchase without regard to the unsettled proceeds of any securities sold. The regulators claimed that the firms allowed clients to execute transactions based on proceeds due from unsettled trades. Datek and iClearing became affiliates of Ameritrade after a merger in September 2002.

European Costs

*Transaction cost analysis is going to become less popular with European fund companies, while fund managers will be spending more on finding liquidity destinations. That's one conclusion of a survey on best executions standards. The survey, which was conducted for OMS vendor Macgregor, also predicted these trends for European fund managers over the next year: further implementation of the FIX protocol, system support for liquidity aggregation and order allocation. About half of the fund companies responding said they have no automated system for aggregating data from various liquidity sources, or for allocating orders to the best places. "I anticipated seeing the increased investment in FIX and other alternative trading venues, but was a little surprised with the results related to TCA as it is an area being focused on by many of our clients," said Kevin Milne, executive vice president, Macgregor.

Knight Upgrade

*Knight Trading Group has been upgraded to a buy by Sandler O'Neill & Partners. Previously, the research firm had rated Knight as a hold. Sandler O'Neill changed its mind because it believes that Knight's core market making earnings are on the rise as Nasdaq volumes increase. Sandler O'Neill also said that Knight's fortunes could improve if "the focus of the buyside turns to execution only venues." However, Knight could also be hurt by changes in soft-dollar rules. And Sandler O'Neill cautioned of potential problems for Knight because of the "continued uncertainty surrounding the Nasdaq market making coupled with the increased competition in the institutional business."

Futures Accord

*The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission have signed an agreement to provide joint oversight of security futures products. NQLX and OneChicago have started trading these products under the supervision of the two regulators. Under a memorandum of. understanding signed by the SEC and the CFTC, each agency will notify the other of any planned examinations, advising each other the reason for the examination. They will also attempt to conduct examinations jointly, if possible.

The two agencies will notify each other "of significant issues arising from these markets and share trading data and related information," according to an SEC release. James Newsome, chairman of the CFTC, said that the agreement will "result in more effective and efficient joint CFTC and SEC oversight of security futures products while, at the same time, avoiding unnecessary regulatory burdens on market participants."