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April 1, 2011

Meet And Greet

Cautious Optimism Reigns at TradeTech

By John D'Antona Jr.

The mood at the TradeTech USA conference, from Feb. 28 to March 2 in New York, was cautiously optimistic, as attendees adjusted to the lower volumes and reduced commissions of the new environment.

Andrew Silverman, global co-head of electronic trading at Morgan Stanley, said that while trading volumes were up slightly in January versus his firm's projections, the crisis of confidence shown by investors brought on by last May 6's "flash crash" still remains. He cited internal trade volume data that showed actual trading flows were below projections for the last six months of 2010. The handwriting is on the wall: Until investor confidence is fully restored, volumes will remain low and commissions depressed, he said, adding that self-regulation by the Street was the way to restore that confidence.

"We can either regulate ourselves or we are going to be regulated," Silverman said. "One of five or one of eight of us here today will not be here next year if we don't regulate ourselves." And the former was much more preferable than the latter, he added.

Despite this warning, the buysiders and sellsiders in attendance were content to eat, drink and almost be merry as they mingled along the Hudson River. This year's three-day conference was held at Pier 60, Chelsea Piers.

Attendees discussed current topics such as anti-gaming strategies, high frequency trading's impact on the market, commission management and future regulatory developments.

This year's conference attendance saw a modest 8 percent bump in the number of institutional and buyside participants, while the overall number of people wasn't much different from last year, according to organizers. A total of 257 buyside participants came to the event, compared with 235 in 2010.

On the vendor front, 45 different firms were represented at this year's meet, unchanged from last year.

One technology vendor likened the mood and participation of the buyside at the conference to that of window-shoppers-the buyside was looking at the new products, but not making any firm commitment to purchase software or other products.

"I'm here to take a look at some of the new offerings, but I have no money to spend," said Carl Reynolds, global systems strategist at Pioneer Investments.

A sellside vendor who requested anonymity said this type of behavior was typical at this year's event.

"It's a buyer's market," he said. "Everybody's looking, but no one's buying. Also, firms are extending their tryout periods as long as they can. It's a bad environment for vendors."

Still, the buyside had plenty to say to the sellside at the conference. Several instant polls were taken, and here are the results:

Attendees were asked to forecast where commissions were headed this year; 43 percent said rates would be stable, 33 percent said they'd be slightly lower, and 15 percent simply said they'd be lower. On the other hand, 8 percent expect an increase-5 percent said commissions would move up slightly, and 3 percent said they'd move higher.

Regarding the number of algorithms they actually use, 89 percent of the attendees surveyed said they use fewer than 25 algorithmic providers, while 8 percent trade with between 25 and 50 providers.

Giri Cherukuri, head trader and portfolio manager at OakBrook Investments, said during one panel that he expects best execution from his brokers. He added that, despite having discretion in working his orders, brokers cannot be mind readers.

"In the end, the onus is on the buyside to communicate and be painfully clear on how we want brokers to execute our orders," Cherukuri said.


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