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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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July 31, 2004

ArcaEx Ramps Up for an Advanced Auction Mart

By John A. Byrne

The Archipelago Exchange (ArcaEx) is planning to establish one of the most highly-developed electronic auction markets in the world, pending a successful IPO.

The ECN-turned-stock exchange - hoping to have its IPO soon - was coming closer to taking that giant step recently prior to the quiet period of the stock offering, according to industry sources. However, it turned down a deal to acquire PDQ - the acronym for Procedure Derived Quotes - an innovative system built by ExchangeLab.

ExchangeLab is a small technology incubator in New York City, run by former NYSE technology executive Chris Keith. Despite the change of plan, the talks foretell a period of massive spending on elaborate systems by ArcaEx in a post-IPO environment, trading executives say.

PDQ is regarded as a more sophisticated version of the failed Primex trading system for listed and OTC stocks. The main idea behind PDQ is the centralization and replication of trading interest on a floor similar to the NYSE's.

ArcaEx declined to comment, citing the IPO quiet period rules. Chris Keith of ExchangeLab said he could neither confirm nor deny the story.