At Deadline

Listed on AZX

The Arizona Stock Exchange (AZX), the New York-based operator of a single-price auction trading system, has applied for the first time to trade listed stocks. The AZX application, filed earlier this year with the Securities and Exchange Commission, covers stocks listed on the New York Stock Exchange and the American Stock Exchange. The AZX currently handles only over-the-counter stocks during the trading day.

The AZX has one call for OTC stocks during the regular trading day, at 10:30 a.m. EST. AZX President Steve Wunsch said the system averages 35,000 single-counted shares traded during its 10:30 a.m. call. The system also has three after-hours calls. The AZX trades both listed and OTC stocks during its after-hours calls, and volume is generally low. "Getting listed permission will help," Wunsch said. "Most customers don't think just OTC when they need to trade. We don't have the relevant listed securities, so they don't come to us." If the AZX receives approval, Wunsch would likely add two calls during regular trading hours, and combine the current 4:20 p.m. and 5 p.m. calls into one call, at 4:30 p.m.

Two-Dollar Brokers

Some independent floor brokers at the New York Stock Exchange are upset that they may be required to put up more capital in their accounts. The reason for the effort: to protect these so-called two-dollar brokers' financial stability. People who heard details claim regulators are nervous that some brokers may be undercapitalized for the processing of trades entered in amounts higher than intended.

The development comes as regulators contemplate the possibility of a meltdown in trading markets, unless clearance and settlement mechanisms, including the capital that cushions firms, are secure. One floor broker said that as envisioned, the plan would require his firm to have capital equal to his largest possible error, an amount that would cover the clearance and the principal involved. "It is totally dumb," he said. "Why don't they ask me to be capitalized like Bank of America?"

It is not clear what is triggering the push for more capital, given that two-dollar brokers currently carry error insurance for trades incorrectly reported. The Big Board declined to comment.

Three Wise Men?

The National Association of Securities Dealers hopes to give Richard Ketchum, Glen Shipway and Patrick J. Campbell discretionary power to impose trading halts in volatile Nasdaq stocks, according to sources close to the NASD. The NASD board is scheduled to consider the plan in a March 25th meeting. The Nasdaq Quality of Markets Committee twice rejected proposals to allow halts, most recently on February 18. NASD rules allow its board to introduce a plan without committee approval. The plan would still need the approval of the Securities and Exchange Commission. Ketchum is the NASD's president and chief operating officer, and Shipway and Campbell are Nasdaq executive vice presidents.

George Jennison, head equity trader at First Union Capital Markets in Richmond, and a member of the Nasdaq Quality of Markets Committee, supports the creation of trading halts. "The NASD is thinking along the right lines, but it will take a while to get right," he said. "[Ketchum, Shipway and Campbell] are the best candidates. But how would you find all three at once? They're busy people." Jennison would not disclose how he voted on the proposals. An NASD spokesman could not confirm the selection of the three executives.

AZX Alliance

Aside from an application to trade listed securities, the Arizona Stock Exchange (AZX) is currently in discussions about possible alliances. According to president and founder Steve Wunsch, the AZX is talking to six registered broker-dealer groups about a partnership.

Wunsch would not name the broker dealers, but said all six are either affiliated with an electronic communications network (ECN), or operate as an ECN. "I'll talk to anyone, anytime. The AZX could be a critical, strategic tool," Wunsch said.

Partnership discussions are nothing new to the AZX. Wunsch said he negotiated with at least 20 exchanges about possible alliances in the past, including the New York Stock Exchange, Nasdaq and the American Stock Exchange. "Traditional members view us as a competitor," Wunsch added. "In the past, an electronic call market was hard for members to swallow. Now it would be conceivable for an exchange to adopt our mechanism. It's a different ballgame."