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A Familiar Road

Traders Magazine, September 2005

Michael Scotti

It seems we've been down this road before. The investment by six brokerage firms into the Philadelphia Stock Exchange is reminiscent of what happened after the SEC's Order-Handling Rules were implemented in 1997. If you recall, the handling rules required market makers and specialists to display customer limit orders that equaled or bettered their current quote. Nasdaq market makers, at the time, had no place to post their quotes, so Instinet became the market makers' ECN of choice. Why? It was the only game in town. So market makers, weary of writing checks to Instinet, formed their own ECNs. And if memory serves, the number of ECNs later topped out at nine. Today, the last of the old-guard ECNs have found merger partners: INET to Nasdaq and Archipelago to the NYSE.

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