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August 23, 2005

At Deadline

By Staff Reports

(Traders Magazine, August 2005)

Shaw Retires *John Shaw, president of Jefferies Group, has resigned. Shaw, 58, spent 22 years with Jefferies, serving as its president for the past five. During his reign, Shaw oversaw the transformation of Jefferies from a firm known primarily for its cash equities trading into an integrated investment bank. Asset management and investment banking fees now account for about 40 percent of Jefferies revenues. In 2000, they represented only 17 percent. The diversification has helped Jefferies weather the hard times in its traditional trading businesses. For the first four years of Shaw's term, revenues from cash equities trading declined. Last year, though, they rose sharply, due to several large block trades that resulted from investment banking relationships, according to the firm. Shaw, a trader and an attorney, joined Jefferies in 1982 after stints at First Boston and Cantor Fitzgerald. His retirement, discussed internally for the last two years, coincides with investigations by regulators into Jefferies' entertainment practices. -Peter Chapman NYSE Projections *NYSE Group expects to increase its market share in the trading of NYSE-listed securities following the implementation of Regulation NMS. That's according to a registration statement filed with the U.S. Securities and Exchange Commission detailing the merger between the New York Stock Exchange and Archipelago Holdings. NYSE Group is the proposed name of the merged company. Currently, the NYSE's market share in NYSE-listed securities is 80 percent. By 2007, it expects that figure to drop to 75 percent. ArcaEx, by contrast, expects its market share in NYSE-listed securities to rise from about 4 percent to 9 percent in the same period. That results in a combined market share for NYSE Group of 84 percent. Under the merger, the NYSE and Archipelago will operate separately at first, although linkages will connect the two trading centers. The projections are significant because the Big Board was expected to lose market share under Reg NMS, according to industry analysts. -Peter Chapman Hybrid Draws Fire *The NYSE's latest hybrid market plan lacks fairness because it gives priority to "hidden orders" over displayed orders, according to the Investment Company Institute (ICI). It filed a comment letter on the latest plan (For more on the plan, see Washington Watch). Specialists, the ICI also held, shouldn't be allowed to provide algorithmic price improvement on incoming orders because that would allow them to step in front of orders. If specialists are allowed to establish an electronic connection to the Display Book, the ICI said, they will see certain market information before anyone else. But NYSE officials said their plan would establish an "appropriate balance of incentives for both liquidity providers and takers." Robert McSweeney, NYSE Senior Vice President, Competitive Position, also said the Big Board will establish an investor advisor committee. It will "review aggregate data on both specialist dealer trades and market quality statistics to assist in determining whether further refinement of any feature of the hybrid functionality is warranted, based upon the experience in the hybrid environment," he said. The ICI and NYSE comments came at the same time that the Securities Industry Association asked the SEC for more information. SIA officials said that certain aspects of the hybrid plan, "overlap with rules and industry practices that have yet to be resolved among industry participants." -Gregory Bresiger