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August 31, 2004

At Deadline

By Editorial Staff

Nasdaq

*Nasdaq Opening CrossSM, a centralized order facility that is designed to provide traders and investors a transparent and accurate opening price, is slated to begin operations. "This electronic opening process will allow all investors to come together and discover a single price that reflects true supply and demand," says Chris Concannon, executive vice president of Nasdaq Transaction Services.

"The new Nasdaq open will offer superior transparency leading into the open and the opportunity for everyone to use that insight to meet their trading and investment needs," Concannon adds. The beginning of Nasdaq's trading day is a very active period. Nasdaq officials said that, at the open, the market is processing some 15,000 messages per second. The Nasdaq Opening CrossSM is slated to begin with two test securities and then expand to live stocks.

Sale

*Knight Trading Group is jettisoning its derivative markets business, selling the unit to Citigroup for some $225 million. "Management concluded that Knight's strongest growth opportunities remain in our equity markets and asset management businesses. And that derivative markets have a better chance to reach its full potential as part of a large company," according to Thomas Joyce, chief executive and president of Knight.

Knight's stake in the electronic International Securities Exchange for options trading is not affected by the transaction. But Citigroup is also purchasing Knight's membership on the exchange. Part of the purchase price, which will be adjusted based on the book value of the unit, will be used as part of a Knight stock repurchase plan.

Derivatives

*How good are the investor protection standards for derivatives trading in the United States versus the states of the European Union? Europe's Futures and Options Association (FOA) is expected to have some answers by the end of the year or early in 2005. FOA Executive Director Anthony Belchambers said that he expects to have "a progress report" sometime in the first quarter. FOA is an industry group that represents firms that trade options, futures and other derivatives. Morgan Stanley is an FOA member. The study is expected to compare the derivatives regulatory framework on both sides of the Atlantic. FOA officials are looking for a less costly regulatory framework.

Upstairs

*Kabrik Trading has established an upstairs desk. The New York Stock Exchange direct access floor brokerage has built a five-person desk in the New York suburbs. To do so it hired trading and technology veteran Warren Epstein away from Rosenblatt Securities. Kabrik is one of several Big Board floor brokers to move upstairs recently. Others are Griswold Company and Stuart Frankel. Market structure changes and buyside needs are behind Kabrik's decision, according to chief executive Jim Conlin. More Big Board orders are sent via programs, leaving fewer blocks for floor traders. Plus, not every buyside desk has the savvy to use the color that floor brokers provide, says Epstein. Order flow on the new desk is split 50/50 between Nasdaq and listed. About 70 percent is worked. The rest is handled electronically. Kabrik uses Portware for baskets and Archipelago for smart order routing within the Nasdaq market. Most listed flow is sent to the NYSE.