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BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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February 24, 2006

Nasdaq's Next Battle: Trade Reporting

By Gregory Bresiger

"So anyone who wants to internalize and interact with order flow on the best bid or offer or at a sub penny better," Herron said, "will simply leave the exchange and migrate to a TRF to fill those orders or to offer print protection against other markets for orders they are working as an agent." He added that, "the TRF is where everyone can go to avoid the time priority established in all these markets," Herron is calling for a regulatory panel on trade reporting facilities.

The SEC, in its order granting Nasdaq exchange status, acknowledged the TRF plan had triggered critical letters.

"These commenters contend," the SEC wrote, "among other things, that because of the affiliation between the Nasdaq Exchange and the limited liability company that will operate the TRF, the Trade Reporting Facility would not really be a facility of the NASD, but instead would be a facility of the Nasdaq Exchange."

The SEC said it would take these captious comments under advisement when the NASD files the TRF plan.

Critics of the Nasdaq exchange plan had argued that the SEC hasn't approved any exchange application without price/time priority.

Jamie Selway, a founder and managing director with White Cap Trading, said Nasdaq, in effect, is striking a deal with the regulators. The SEC will allow a new form of internalization through the establishment of a TRF. But, he contended, it would also permit any exchange to establish a TRF.

"It could become very confusing," Selway said.

But the TRF idea could also become very popular. Indeed, Brett Redfearn, senior managing director, institutional equities with Bear Stearns & Co., said some of the regional exchanges are looking to create their own TRFs.

"This opens up a whole new door about potential tape sharing agreements and how people are going to deal with internalized order flow," according to Redfearn.