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Spoofing, Surveillance and Supervision

Jay Biondo, Product Manager - Surveillance at Trading Technologies, co-authored an article along with James Lundy and Nicholas Wendland, both of Drinker Biddle & Reath LLP, reviewing the CFTC's regulations and expanding efforts, 21st century surveillance and supervision, as well as strategic recommendations.

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June 20, 2005

Knight's ECN Dreams

By Peter Chapman

With its recent acquisition of the Attain ECN, Knight hopes to challenge the duopoly of Nasdaq and Archipelago in the Nasdaq market. By becoming a force among Nasdaq market centers, Knight hopes both to save money and even make a little.

The plan is to place a "significant" amount of its orders on Attain with hopes of attracting the orders of other traders. If sufficient trading migrates to Attain, Knight will save whenever it lifts liquidity from Attain. It will not have to trade elsewhere and pay for the privilege.

Knight plans to tap its largest clients as well as other market players to contribute liquidity to the new ECN. "A certain percentage of our current order flow will be represented on Attain," Tom Joyce, Knight's CEO, says. "And then populated with more of our in-house liquidity as well. We expect it to be an attractive alternative in the market."

Joyce won't disclose how much volume he expects to post on Knight's new ECN, but it is likely to be considerable. Three-quarters of all Nasdaq trading is done on Nasdaq, Archipelago and INET. Assuming the dispersion of Knight's trading is similar to that of the market as a whole, then potentially three-quarters of all Knight's trading could migrate to Attain.

Currently, Attain is represented on the NASD's Alternative Display Facility under the moniker ATTN. It is also represented on the Nasdaq Market Center under the acronym NOCI. Joyce won't disclose where Knight's new ECN will post or report trades. Industry sources, though, say Knight plans to print trades on the National Stock Exchange. The new ECN will trade over the counter names as well as Nasdaq and listed securities.