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Tim Quast
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We're All HFTs Now

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April 16, 2007

Don't Expect Big Changes For Block Trading Come July

By Peter Chapman

Block trading won't change much under Reg NMS.

That's the prediction from one of the Street's largest trading shops. Will Sterling, a managing director at UBS, says the practice of trading blocks will undergo only "subtle" changes after July 9.

That's the date the Securities and Exchange Commission's Regulation NMS becomes effective for broker-dealers.

"Brokers will have a little more impact when we trade a block," Sterling told a gathering of traders at this year's annual TradeTech USA conference. "It might make pricing a block a little less efficient. It might be a little more expensive for the broker. But I see no big sea change."

Under existing rules, block traders can print trades at prices inferior to the markets' best prices. But under Reg NMS they will not be able to trade through the market's best prices, except in certain cases.

"If I want to put up a block for a client that's a nickel up," Sterling explained, "I can't do that without sweeping the markets up a nickel. Or at least [sweeping] the best bid or offer for each exchange."

Block traders will have more "impact" on the marketplace because they will have to "take more shares out of the market" than they used to, Sterling added.