Future of the Market *The stock market of the future could become a network of open and closed order books. The open books, or stock exchanges, would be operated by self-regulatory organizations. The closed books, or dark pools, would be operated by large broker-dealers. Connecting the books would be a network provider. Order Execution Services (OES), a Princeton, N.J.-based broker-dealer that offers connectivity to exchanges, is positioning itself to make this networked market a reality. The firm may replace much of the existing Intermarket Trading System (ITS) that links exchanges. OES has won a mandate to provide routing for both Nasdaq and the Philadelphia Stock Exchange. It is also under consideration by other exchanges. It is positioning itself to provide routing for the growing number of dark books developing at large broker-dealers. "No one has yet to emerge to integrate dark books under Reg NMS," says David Scheckel, OES' chief executive. "I think we can." The stock market of the future could have orders flowing freely between dark pools; between exchanges; and between dark pools and exchanges, OES execs say. "They would be linking into us and we are linked to the broader market," Scheckel says. -Peter Chapman Quants After Dark *NYSE Group is expanding its after-hours crossing business with the acquisition of a new matching system targeting quantitative portfolio managers. The Big Board's purchase of Matchpoint Trading marks a new strategy for NYSE, which already has four after-hours crosses for single stocks. With the addition of Matchpoint, NYSE will court quants of various stripes-like index and enhanced index players- who trade lists of stocks. These investors need to manage their exposure to the market, so a crossing system must have risk controls balancing sell and buy orders so cash holdings don't wander from their investment discipline, according to Mike Cormack, NYSE Group executive vice president. The crossing space is filling up. ITG and Instinet are already doing after-hours crosses. Nasdaq is planning one. The purchase brings into the NYSE fold Jim Ross, an industry veteran who's been involved in after-hours crosses since the early 1990s when he ran Instinet's cross. Ross, the former CEO and founder of Matchpoint, is now vice president of crossing technology. The system is slated to begin early next year. -Michael Scotti Stocks Cross Free *Nasdaq, looking to attract more block business, is adding a new network comprised of intraday crosses and post-close crosses. The Nasdaq Crossing Network, which had been approved at presstime, will provide better block trading, Nasdaq officials say in filings. The new network will "execute block trades quickly and anonymously, while minimizing market impact," according to Nasdaq's order in a recent Federal Register. Nasdaq officials also claim its blind match will ensure no information leakage. The Crossing Network, which includes all Nasdaq, NYSE, Amex and regional listed securities, is due to begin on September 25th. Crosses will be free for the first six months, according to the filing. After that, Nasdaq will charge $0.001 per share, subject to SEC approval. The intraday crosses will take place at 10:45 a.m., 12:45 p.m. and 2.45 p.m. The post close cross will be executed at 4:30 p.m., all at Eastern times.
