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November 29, 2005

Getting Paid

By Michael Scotti

The words of Ralph Acampora still ring clearly. Acampora, the well-known technical analyst, last month addressed the Security Traders Association's annual conference in Boca Raton, Fla., just two days after he and his entire team were shown the door by his long-time employer, Prudential Securities.

Acampora's speech had some surprises. He began his typical market outlook like any of the other hundreds-if not thousands-of presentations he's given over an illustrious career. But then Acampora offered a roughly five-minute commentary on his life, his firing and the industry.

It was emotional. It was honest. He said he didn't blame Prudential for axing the department. "I would have done the same thing," he said. The problem, he pointed out, is that institutions now don't want to pay for his research. They pay for it currently through commission dollars. However, that relationship has created a disconnect within the securities industry. The same clients-supposedly too parsimonious to pay for his research-were the same souls upset that Acampora and his associates were fired. It doesn't add up.

The way things are moving toward paying for research, it might not be too long before Acampora won't have to worry about commissions from institutional clients to get paid, whether he turns independent analyst or joins a brokerage firm. That's because the so-called unbundling of executions and research may have gotten a boost last month.

Fidelity Investments reached an agreement with Lehman Brothers to pay for research and executions separately. This agreement and its ramifications are the current hot topic on Wall St. And how this "unbundling" evolves will continue to draw interest. This issue of Traders Magazine includes a story on the SEC's recent guidance on soft dollars (Washington Watch). Also, a Morgan Stanley interpretation of the Fidelity-Lehman agreement is included in At Deadline.

Executive Editor Peter Chapman's cover story on Deutsche Bank should also provide for interesting reading. Deutsche hired Robert Karofsky, the former head of cash equities at Morgan Stanley, to lead its own U.S. equities division to the promise land. Traditionally strong in the international and program trading area, Karofsky & Co. now need to build out the rest of the firm's equity offerings.

Chapman's story outlines why Deutsche, a powerhouse in Europe, thinks it can crack the top five of bulge-bracketdom in the U.S., leaving its current tier-two status in the dust.

Enjoy the issue.

Michael Scotti,

Editorial Director