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Who Created This Mess, Anyway? Hint: It Wasn't the Exchanges.

Traders Magazine Online News, November 12, 2018

Justin Schack

The following was posted on LinkedIn by Justin Schack, Managing Director and Partner at Rosenblatt Securities. 

I’ve been thinking a lot lately about how intense the debate is getting over potential equity-market-structure reforms, as big banks and brokers, with support from many buy-side firms and upstart exchange IEX, line up against the big three exchange groups. And I think some historical perspective is essential to understanding what’s going on right now and what should be done, if anything, to modernize market structure.

So I dug up an Institutional Investor cover story I co-authored, which ran all the way back in January 2000 – nearly 19 years ago — and appropriately carried the title “Trading Meets the Millennium.” The piece runs 17 pages (practically unthinkable in today’s media landscape), with quotes from two future US Treasury Secretaries (Paul O’Neill, then chairman of Alcoa and an NASD board member; and Hank Paulson, then Goldman Sachs CEO), then-Senate Banking Committee Chairman Phil Gramm, then-NYSE Chairman Dick Grasso (and future NYSE CEO/then Goldman President John Thain), then-NASD chief Frank Zarb, then-Merrill Lynch CEO Dave Komansky, Vanguard Group’s Gus Sauter, Knight Securities founder/then-CEO Ken Pasternak (and future Knight CEO/then-Merrill trading executive Tom Joyce) and even Bernie Madoff. It is not available online but I photographed each page earlier and am posting here for anyone who wants to have a read (yes, that’s a 27-year-old me with the glasses in the editor’s note). 

Click here for the orignal story

Re-reading this story brought back both fun and foul memories: Talking to an array of innovators in electronic trading (both for this story and in the previous three years of reporting for II and its newsletter division) about how the world was changing and being present for the birth and early gestation of modern market structure; Sitting in Dick Grasso’s office in a suit and tie, with the heat characteristically turned up to about 90, while I and former colleague Hal Lux grilled him on how he’d respond to pressure from his biggest member firms to revamp the NYSE; Countless late nights with Hal in former II Editor Mike Carroll’s office, where I think we probably ripped up our story and started all over again at least 10 times during months of reporting, writing and editing. Mike brought us to exasperation and exhaustion many times but, as happened with many of my II stories from that time, also made the finished product dramatically better. He got so involved with this piece that he took a byline with Hal and I. Despite a few passages that now feel cringy for obvious reasons (like the idea of exchanges running “on a few mail-order Dell computers”), I think it holds up really well.

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