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June 18, 2008

Thank You for Trading

By Michael Scotti

Traders Magazine was paid a compliment when the Securities Industry and Financial Markets Association asked me to moderate a panel at its institutional brokerage conference. That told me that the industry acknowledges the effort of this publication and our staff. The hard work of Peter Chapman, Gregory Bresiger, Nina Mehta and James Ramage is visible in each monthly issue and in our weekly e-newsletters.

It's a tough job to understand trading's nuances. But to then explain developments to a savvy audience-in a fair manner-is the test. The complexities of equity trading today are captured in a quote in this month's "Buyside Snapshot." James Hill of HIMCO said: "There's a lot more work [today] to knowing what's happening with your order."

This month's cover story is about dark pools sending out messages to other execution destinations. This is another example of today's complex equity-trading world. Dark pools have always had variations of information leakage. In Nina's piece, you can read about these so-call "Gray Pools" in depth.

Preparing for the SIFMA session, "Evolution of Trading:A Practitioners' Liquidity Report Card," I was reminded not only of the changes in equity trading over my last 15 years, but also my own evolution. The first financial story I wrote was on the Crash of 1987. The Trentonian's managing editor asked me to visit a Merrill Lynch office in Lawrenceville, N.J., on my way back from city hall.

It was just after 4 p.m. when I saw an elderly man staring at the ticker in disbelief, saying, "I can't believe it...I can't believe it...." His monologue continued for five minutes while I waited for the branch manager. The manager explained to this neophyte that despite the 500-plus drop in the Dow, it wasn't all bad: The bond market went up.

After a 15-minute interview, I exited, passing the bullpen where registered reps plied their trade. There stood the same retiree, shoulders hunched, reciting the same mantra: "I can't believe it...I can't believe..." The reason I mention this is because no one knows what tomorrow brings. It's the same in the news business and that's what keeps us going. Who could have imagined 20 years ago what our markets would be like today? Five years ago, who could have predicted dark pools? Recently, who would have called Bear Stearns' collapse?

One aspect of equity trading today stands out as I prep for the conference. Traders have many new self-trading tools and venues-it's not just exchanges or upstairs dealers. There are numerous execution choices. It's a big tent. That reminds me of how organizers always used to hype their events in my newspaper days: "There's something for everyone."

Michael Scotti

Editorial Director

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