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September 30, 2004

Another FIX


*Reuters' popular FIX communications technology, known as TRIAD, is facing competition. A Maryland-based start-up called Raptor Trading has built a similar system and landed its first customer. Weeden & Co., a broker dealer based in Connecticut, will go live this month. Both Raptor and TRIAD enable brokers to manage and route outgoing indications of interest, trade advertisements and trade reports as well as incoming orders. Raptor is run by Mark Hinman, a former developer at consulting and integration firm Ease Technologies. Hinman developed TRIAD while at EASE. Reuters bought the TRIAD assets from EASE in April 2002 after the bankruptcy of Bridge Trading. Bridge had been the licensee and distributor of TRIAD. Some 70 brokerages use TRIAD to manage FIX messages. Weeden switched from TRIAD to Raptor because of its "cutting edge technology," according to Michael Mook, a Weeden trading executive.

Hedge Funds

*Not only is the Securities and Exchange Commission divided on the hedge fund registration proposal, but so is the hedge fund industry. Officials of small funds, in comments filed with the SEC, complain that administrative and legal costs could be burdensome. However, fund of funds managers generally favor the plan. They urge that their funds should receive extra time to comply with the requirements of audited financial plans. Some hedge fund officials have complained that registration would be duplicative, while others have said the industry needs more regulation to prevent another Long Term Capital Management disaster. Meanwhile, it is unclear if the SEC is going to give the hedge fund registration plan final approval.


*Four of the Street's top trading houses reported lower revenues in institutional equities in the latest quarter. Goldman Sachs, Morgan Stanley, Lehman Brothers and Bear Stearns all took in less in the third quarter than they did in the second. The news marks the group's second sequential quarterly decline. Goldman grossed $910 million in the third quarter, down from $1.08 billion in the second. Morgan Stanley took in $883 million, down from $1.11 billion. Lehman brought in $319 million, down from $520 million. Bear Stearns took in $239 million, down from $252 million. The firms blamed the downdraft on flat to declining equity prices, reduced volatility and fewer customer orders. Yet despite the sequential decline, all four shops are doing better this year than last. As a group, they took in $9.0 billion in the first nine months of 2004. Last year it was $7.6 billion.

Big Board

*If the Reg NMS ITS trade-through reform changes are adopted, it would be "appropriate to have exemptions in a number of circumstances, such as intermarket sweep orders." That's the consensus of those who are sending in Reg NMS comments to the Securities and Exchange Commission, according to Annette Nazareth, the commission's market regulation head. "Other commentators suggested that the Commission consider exemptions for block trades, VWAP trades, stopped orders, and portfolio basket trades," Nazareth told an Investment Company Institute Equity Market Conference in New York City. Nazareth said that a carefully crafted trade-through rule would have clauses to protect against "chasing ephemeral quotes and permit fast trading."