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September 30, 2004

Buyside Trader Takes Aim At Sellside's Gravy Train'

By John A. Byrne

The traditional sellside execution broker is having difficulty competing for institutional order flow. ECNs are increasingly the axe in stocks as algorithmic models fill orders once destined for the sellside's natural liquidity.

That was the controversial message from a panelist at an algorithmic trading conference hosted recently by ITG in New York City. Blair Adams, a senior trader at American Century, told the packed event that his firm uses electronic platforms for 90 percent of its OTC business. He says natural liquidity has disappeared.

"The role of the sellside is to show me natural liquidity that is sizeable enough for me to come in." Adams said. "They have to work harder. We pay them enough already and I don't like the gravy train that they have." Blair says that natural liquidity is "a beautiful thing."

"If it is there, fine, we are there and that order is not going to see an algorithm," he added. "The reality is that the natural liquidity is not there very often."

The attendees included many ITG clients. They were welcomed by a popular chief executive who unexpectedly came out of a two-year retirement. Ray Killian, Jr. was recently named president and CEO of ITG, having succeeded Robert Russell. Killian served on two previous occasions as CEO.