Commentary

John Turney
Traders Magazine Online News

Foreign Exchange Infrastructure: Yesterday, Today and Tomorrow

In this exclusive to Traders Magazine, John Turney, Global Head of Outsourced FX at Northern Trust, discusses the evolution of the fx infrastructure and what is to come.

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October 19, 2006

At Deadline

By Editorial Staff

*Knight Capital Group expects its Direct Edge ECN to be trading 100 million shares per day by the end of the year, says Tom Joyce, Knight's chief executive. Joyce made his forecast during a recent conference call with analysts.

During the first half of the year, Direct Edge processed about 40 million shares per day, Joyce noted-below expectations. Those levels are expected to improve, though, now that Knight has incorporated outbound routing, Joyce told Wall Street analysts. "We are disappointed with our sales effort unquestionably," Joyce said, "and that is why we are going to focus and push hard in the second half of the year." Outbound routing permits orders not matched on Direct Edge to travel elsewhere for a potential execution. Knight added 10 to 15 new clients with the incorporation of outbound routing, Joyce said. The system now matches about two-thirds of all shares it touches, according to Joyce, routing out the rest. As Traders Magazine went to press, Direct Edge was accommodating only Nasdaq trades, but was expected to add NYSE-listed orders soon.

-Peter Chapman

Gasser to Head ITG

*ITG Inc. last month named Robert Gasser CEO and president of the trading services and transaction cost analysis firm. The equities trading pro replaces ITG founder Ray Killian, who remains chairman of the board.

Gasser's new gig comes at a time when ITG is expanding its range of products. "Gasser is highly knowledgeable about market structure, an excellent salesman and a capable manager," says Rich Repetto, an analyst at Sandler O'Neill. He adds that the challenge Gasser faces will be growing into the "role of visionary" that Killian occupied. Gasser most recently was CEO of NYFIX Inc., a provider of electronic trading solutions, including crossing network NYFIX Millennium. He stepped down from that position early last month after private equity firm Warburg Pincus acquired a 30 percent stake in the company and installed its own CEO. NYFIX had grown its FIX network and had recently seen an increase in listed trading in Millennium, but was embroiled in the industry's options backdating scandal.

Gasser had been at NYFIX for five years. Before that, he was head of U.S. equity trading at JP Morgan.

-Nina Mehta

NYSE Reworks LRPs

*The New York Stock Exchange is taking steps to slow down trading in its upcoming hybrid marketplace. Periods of manual trading, although infrequent, according to the exchange, will last longer. Now, once a so-called "liquidity replenishment point" (LRP) is triggered, the specialist will control trading for 10 seconds. Under its original plan, the New York called for a five-second interruption.

LRPs are circuit breakers that shut down trading on an automatic basis when prices run too far, too fast. The lengthening of the time-out period came about as the NYSE reworked the rules defining LRPs. The Big Board reduced the number of LRPs from two-momentum-based and price-based-to one price-based LRP. LRPs will now be based on last sale prices and will take into account average daily volume and price levels. LRPs will be calculated at specified time intervals, such as every few minutes; after a manual trade by a specialist; and when automatic executions resume after an LRP has been reached. To start, LRPs will be calculated every 30 seconds during the trading day, according to the New York.

-Peter Chapman