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Monday, March 24, 2025
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What Do You Do When Computers Don’t Speak? FIX Is the Answer for Buy-Side and Sell-Side Trading D

By
Editorial Staff
-

A standard computer format embedded in order-routing, pre-trade indications and other dealer programs is solving a vexing problem, initially triggered by the upsurge in U.S. equity transaction volume.

Facing expensive bottlenecks in the early 1990s, trading desks scrambled to more fully automate the order-flow process, as increasing volume exceeded the capacity of human traders to handle the business efficiently.

The mission seemed straightforward, except for one thing: the electronic systems used by buy-side and sell-side firms to deliver and receive each others data often were incompatible. Many sell-side desks, in fact, had to customize their computers to receive instructions from buy-side clients.

Meanwhile, the telephone and the fax machine, hardly cutting edge, often were the only data-delivery mechanisms that circumvented the problem.

The solution? Overlaying the programs with similar lines of computer code.

These lines of code are the FIX protocol, named for the U.S. Financial Information Exchange Steering Committee that rushed to the rescue when computers at U.S. brokerages and their mutual-fund clients were not always on speaking terms.

The Past

Prior to FIX, sending and receiving allocation instructions, indications of interest, or IOIs (for example, a willingness by the sellside to buy 5,000 shares of Intel or to sell 2,500 shares of Microsoft) and order-execution reports in a real-time electronic form was problematic.

Back then, one of the best-known types of common protocol, or messaging standard on Wall Street, was supported by the common message switch for listed orders routed by the New York Stock Exchange's SuperDot system.

But the FIX protocol didn't take long to take root in trading-room systems.

When the U.S. FIX Steering Committee of the FIX Protocol Organization that oversees FIX in the U.S. convened in New York in September, the attendees spent most of the two-hour meeting noting how the protocol is being adopted domestically and overseas.

Since FIX was introduced by ten major buy-side and sell-side firms (led initially by powerhouses Solomon Brothers on the sellside and Fidelity Management and Research Co. on the buyside), most large financial firms have introduced the protocol.

In essence, FIX consolidates a barrage of information users receive and deliver, often over dissimilar PC platforms.

"Information management is FIX's strongest advantage from the trader's perspective," said Mike Cormack, co-chairman of the U.S. FIX Steering Committee.

"It makes us smarter about where we go with our business, allows us to see more information from the brokerage community, and sort and act upon it based upon our workflow," added Cormack, who heads domestic equity trading at Kansas City-based American Century Investments.

FIX is also cost-efficient, since it reduces the need for sell-side traders to run dozens of leased lines to buy-side accounts.

"Traders can only make a certain number of phone calls at once. FIX gives them the ability on both sides of the [trade] to replace those calls with electronic notification," said Scott Saber, senior vice president at Lyndhurst, N.J.-based VIE Systems, which manufactures FIX-compliant middleware for financial-services firms. "That's important if you're a trader and you need to see all of the information your competitors are seeing."

Definitive Standard

With more firms across the investment community embracing FIX, Lawrence Tabb, group director at The Tower Group, a Newton, Mass.-based securities-industry consulting and research firm, says FIX is unlikely to be challenged as the definitive industry standard.

"People are in various stages of adopting FIX, but there is no significant alternative for electronically communicating between buy-side and sell-side firms," he said. "It is pretty much the industry standard, and will continue to be as more companies use it on their networks."

Now even the smallest firms, brokers and marketplaces are adopting the FIX protocol.

The New York based National Quotation Bureau, which provides quotations for more than 6,000 over-the-counter securities, will use a FIX engine when it automates the pink sheets early next year.

"FIX is going to be the new dial tone for Wall Street. From the biggest to the smallest firms, they'll all be talking FIX in the near term," said National Quotation Chairman Cromwell Coulson.

The U.S. FIX Steering Committee is quietly adding new firms that have adopted the FIX protocol.

At its meeting in September, committee members discussed how it is helping to speed up global straight-through processing (the handling of trades completely electronically across national borders, from execution to processing).

At the moment, the committee is pressing trading professionals at several large firms in Japan to adopt FIX. Early last month, more than 200 professionals showed up at a workshop in Tokyo as a first step towards the launch of a Japan-based steering committee of the FIX Protocol Organization. Efforts are also afoot to promote FIX usage in Australia.

Separately, the FIX Protocol Organization is mulling over the creation of a formal process that would certify the bona fides of FIX- compliant systems.

Vendors

As FIX becomes popular in the U.S. and overseas, industry vendors are moving in lockstep.

"In addition to the work of the steering committee, FIX is taking a stronghold because there are more [FIX-compliant] vendors and products than there were two years ago," Cormack said.

The list of FIX-compliant products include The MacGregor Group's Predator system and The Longview Group's Landmark system.

Several clients of Boston-based MacGregor, including State Street Global Advisors in Boston, have adopted Predator for routing orders to broker dealers. The Longview Group, another Boston vendor, has some six clients using the FIX protocol to transmit IOIs.

Indeed, it is the availability of vendor-based, FIX-compliant systems that has enabled small-sized to medium-sized trading desks to cost-effectively adopt the FIX protocol, experts say.

"Some niche firms that are very tech-oriented may implement their own proprietary systems that use FIX," Cormack said. "But in general, smaller firms will use vendor solutions because they may not have the information-technology budgets of larger firms."

While the technical side of FIX does not present serious concerns, there are, however, some areas of the protocol that have raised questions.

Tabb at The Tower Group says there is no consistently-defined method to translate FIX information on the receiving end.

With messages like IOIs, for example, this may present few problems. But for more complex messages like partially-executed trades, problems can arise in processing the transactions.

Tabb says that as vendor products with FIX engines become more standardized, the aforementioned problem will be resolved. One engine, which translates non-FIX messages to FIX messages, is Stamford-based Trinitech Systems' FIXTalk for listed trading.

As the first vendor to develop a FIX engine, Trinitech also provides the FIX-compliant Trinitech Equity Order Management System for listed business. Trinitech has also signed up nearly a hundred firms for connectivity to its NYFIX network since it was launched last year to translate non-FIX protocol to FIX protocol.

"The majority of traders in this country are still doing business the old-fashioned way, getting on the phone and calling their broker," said Trinitech President and Chief Executive Peter K. Hansen. "The [FIX] pioneers have sorted out the initial hiccups with FIX, and have gotten the new electronic order-routing standard up to a working level."

"In the next 12 to 24 months," he added, "all traders will be provided with the capability to generate orders from their PC screens, saving them a ton of phone calls."

While Hansen acknowledges that interconnectivity among the growing number of firms, networks and vendors using the protocol is the biggest issue facing FIX, he adds that the most immediate issue is ensuring the compatibility of FIX with protocol supported by other standard-setting groups.

These include SWIFT, a bank-run group named for the Society for Worldwide Interbank Financial Telecommunications, which is overseen by the Global Straight-Through Processing Association based in the U.K.

"Whereas the original and primary idea behind FIX is buy-side to sell-side communication, involving the handling of order flow, it is now expanding to enable communication among a wider variety of trading systems and financial networks," Hansen said. (At its September meeting, the FIX Steering Committee discussed FIX's integration with other protocol such as SWIFT.)

Message types exist in FIX to handle every stage of the trade. But in the short term, the focus of FIX will likely continue to be IOIs and trade message handling between buy-side and sell-side firms.

"I don't think FIX has a huge interest in getting into the post-settlement details other than sending out allocations," Cormack said.

That's why the U.S. FIX Steering Committee plans to work more closely with other organizations such as SWIFT to ensure that FIX is integrated with their messaging protocol.

Looking ahead, as markets continue to converge and computers provide more efficient trading technologies like FIX, adoption of the protocol seems unstoppable. "If you look at where we're going globally, we're going towards electronic trade execution," Cormack added. "FIX is ready to accommodate this."

Godfather of SOES Writes For The Little People’

By
Editorial Staff
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Harvey Houtkin is not happy with the big market makers of Wall Street.

But given these politically-correct times, please don't call this slightly paunchy revolutionary any of these horrid names: a bandit, a roach, a shark, or even an electronic highwayman. Names do hurt this author.

Houtkin, who has spent over a decade trying to pull an end-around on the powers that be in the brokerage world, is angry. And he says the average individual investor who has just sold a stock isn't in the mood for beer and Skittles either.

"I do not believe there is a person in this country who has interacted with the brokerage community in the execution of a trade who has not felt screwed," Houtkin writes.

And the author wasn't even talking about Smith Barney's famous "boom room." Or Prudential Securities' poisonous partnerships. Or Dean Witter's wretched rollups. Or the "loaded" with sales charges mutual funds of many of the wirehouses, many of which have embittered tens of millions of investors, who when they hear the word broker launch into a paroxysm of invective too brutal to put into these gentle pages, or any family publication.

SOES Bandit

No, Houtkin, the original Small Order Executive System, or SOES bandit ah, advocate is talking about something more basic than a few bad products that keep the lowly scribes gleefully writing about the dead and wounded of investing. He believes the basic problem of the trading business is the flawed relationship between the financial intermediary called a broker and the individual investor he or she supposedly wants to serve.

Actually it's the investor who gets served up on a platter, Houtkin contends. Will the broker put the interests of the firm or the investor first? For Houtkin, the preceding was a rhetorical question.

"Putting faith in your broker to do the right thing is like Little Red Ridding Hood trusting the wolf," Houtkin writes.

But Houtkin wants to do more than pump up a kind of trading firm that he runs and champions. He wants to invite more rivals for the big Wall Street firms that he detests.

This book is a primer for trading without brokers, for investors becoming opportunistic DAET (Direct Access Electronic Trading) traders who make their own profits without the direction of "full-service brokers," a revolutionary concept. It is also an invitation for those interested investors to become DAET traders so they can trump what Houtkin believes are the antiquated trading technologies of the big firms.

Houtkin depicts the big market makers as evil Luddities, who he contends have a stake in slowing down the Information Revolution.

Think of it: If Houtkin is right, then he may someday be regarded as the anarchist who humbled the big boys of Wall Street. If he is right, then the Merrill Lynchs of this world are reactionaries fighting a war that is already lost.

The Royalist Mother Merrill, for example, wants to discourage online investors from doing their own trading. The Merrills of this world cannot imagine a world without their tens of thousands of brokers holding hands with investors, who hang on their every pronouncement. Houtkin cannot imagine a world in which these brokers will be anything but superfluous.

Houtkin argues that those looking for a second career or an interesting avocation should try day trading. The chairman and chief executive of Montvale, N.J.-based All-Tech Investment Group, advocates those ready for DAET should "grind it out;" they should adopt a low tolerance, high-velocity trading style.

"These traders watch many actively-traded stocks, get in fast on seeing a trend developing, grab a quick eighth or quarter point, and say good-bye," he writes.

The NASD

Houtkin is also bitterly critical of the National Association of Securities Dealers, claiming it disgraced itself and did everything possible to squash his movement.

"Literally from the first day of its implementation of SOES in 1984, I had problems with the NASD over its use to the point where I felt compelled to stop using this apparently wonderful system," Houtkin writes.

It was only the Securities and Exchange Commission, under the leadership of Arthur Levitt, which finally reversed the SEC's policy of malignant neglect. It finally took a regulatory action against a self-regulatory body, the NASD, in August 1996.

"I will state it simply and up front," Levitt said. "We have found a widespread course of conduct among market makers to coordinate their quotes. Investors paid too much and received too little when they bought and sold their stock on Nasdaq. New traders were, as a matter of course, trained in this fashion. Over time, this practice became the expected standard."

The author also believes that most members of the media have ignored the attempts to crush SOES. He notes that when market makers settled a class-action lawsuit for $1 billion which he obviously thinks is not much given the market makers' considerable resources it was buried in a back page of the Wall Street Journal.

Houtkin's book clearly challenges the old saw that many government regulators have repeated for generations: The U.S has the freest, most open capital markets in the world.

Levitt, one of the few Wall Street powers who isn't ripped by Houtkin, warns that the issue is more than one of trying to crush a unique form of direct trading.

"Markets exist by the grace of investors. When those who direct them lose sight of that cardinal rule, and sacrifice investor interests on the altar of short-term gain, then far from helping their market, they hurt it," Levitt says. "History regularly attests to this truth: witness the New York Stock Exchange in the 1930s, the American Stock Exchange in the 1960s, and now Nasdaq in the 1990s."

Divided Duties on the Desk

By
Editorial Staff
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Quite simply, Timothy M. Sheridon is a trader at Harris Bretall Sullivan & Smith in San Francisco. But he has two distinct responsibilities at the firm.

Sheridon spends half of his time trading for Harris Bretall's own accounts, mostly for pension funds and high net-worth individuals.

He also trades for the various wrap programs Harris Bretall manages for major brokerage firms.

"We've seen the most growth in wrap accounts," Sheridon said. "Even with the market down recently, our clients are still adding money and opening more accounts."

Wrap accounts are investment portfolios, set up and marketed by brokerage firms, allowing smaller investors access to institutional money managers. The brokerage firms turn maintenance of the wrap accounts over to money-management firms that charge a handling commission.

Harris Bretall manages $2.3 billion in assets, equally divided between its own accounts and its wrap accounts. The firm places a $1 million minimum on its managed portfolios. The wrap accounts allow smaller investors to access Harris Bretall's money-management experience.

The sponsoring brokers provide Harris Bretall with software packages or direct electronic links into their desks for management and trading for the wrap accounts. While the firm's strategy committee makes overall portfolio decisions, two Harris Bretall portfolio managers handle the various accounts in the programs. Sheridon and three other traders execute orders for the accounts.

"What is complicated is the different software packages. That can be a challenge," Sheridon said. "We [the four Harris Bretall traders] switch jobs every six months or so to make sure we know every area of our business."

The programs vary in size, running from five to 1,500 investors. The largest wrap program at Harris Bretall has more than $500 million in assets. The firm can trade for the entire program, or single out a specific client or group of clients for directed orders.

Harris Bretall invests almost entirely in U.S. large-cap equities. Most wrap trades are electronically executed on the New York Stock Exchange's DOT systems, with orders over 5,000 shares handled manually.

Sheridon said that traditionally, any large order in a wrap program was directed to the broker who set up the account. So, Sheridon, for example, would work a block order in a PaineWebber wrap program to the firm's New York trading desk.

But recently, brokers have given Harris Bretall more flexibility over the wrap accounts. "With more control, we can search more for best execution," Sheridon said.

In his six years at Harris Bretall, the firm's wrap business has nearly doubled, to almost $1.2 billion in assets. But despite the growth at Harris Bretall, Sheridon said wrap accounts get little attention on Wall Street.

"Not many people know much about wrap accounts," he added. "But managed assets are becoming more important to Wall Street firms. Trades of 250,000 shares or more happen almost every day in wrap programs."

Because wrap accounts are handled by only a handful of firms, Sheridon has built close relationships with his wrap brokers. "I've got one guy that I can practically grunt to on the telephone and he knows its me," Sheridon laughed. "It's scary."

Sheridon came to Harris Bretall six years ago from Kidder Peabody in San Francisco, largely because of the firm's commitment to wrap accounts.

He started his career at Kidder Peabody in the mid-1980s, and in nine years he handled everything from computer programming and cold calling to trading for the firm's portfolios. He left the firm in 1992 to join Harris Bretall.

"Harris Bretall was expanding in the wrap business then, which is what I liked," Sheridon said.

Sheridon also liked the informal environment of working at a small company. Harris Bretall has only 45 employees, and its founding partners still work at the firm. "I can walk into the kitchen, and sit down to lunch next to one of the partners having a sandwich," Sheridon said. "It's a nice feeling."

Last year, holding company Value Asset Management acquired a stake in Harris Bretall. The Westport, Conn.-based company invests in privately-owned firms that manage between $500 million and $10 billion in assets.

The agreement has had no effect on the day-to-day business at Harris Bretall. That consistency suits Sheridon, who also balances two responsibilities at home.

He and his wife Lori are kept busy by their one-year-old daughter Danielle. And Sheridon spends much of his remaining time in the never-ending restoration of his house, a 1903 Victorian in the center of San Francisco.

"When you own a Victorian home, I don't think you ever finish restoring it," Sheridon said. "I've been working on this one for ten years."

He's currently gutting his basement and building an extra bedroom, doing most of the work himself.

"I really enjoy the work, and balancing it with my life," Sheridon added. "I look forward to finishing the house. If I survive it."

NASD Plan to End Riskless’ Double-Trade Reports: Nasdaq Reported Volume Would Dip, But Traders Ar

By
Editorial Staff
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The National Association of Securities Dealers is planning to eliminate the double-counting of Nasdaq market makers' riskless principal trades.

Under a proposal filed by the NASD with the Securities and Exchange Commission, a market maker would only be required to report a riskless principal transaction as a single trade, even though the desk bought or sold shares from another dealer to fill the order the customer sent moments earlier.

The measure could save market makers an estimated $20 million annually, based on current trade volume. While it would reduce average reported daily share volume on Nasdaq by an estimated nine percent, market makers are not complaining.

An NASD official, who declined to be named, warned against unrealistic expectations, however, stressing that the rule would probably only bring a modest material benefit. "Traders will derive some benefit, but I would hate to see unreasonable expectations," the official said.

"A dealer is at risk 95 percent to 98 percent of the time," the official added. "The risk may be for two seconds, five seconds, a minute. If no one else steps in, it's his. In the last two to three weeks, people have learned there really is risk."

Sounding a warning, the NASD official said he would be amazed if the number of riskless trades suddenly skyrocketed under the new rule. "They [market makers] better not screw around and use trade reporting to save fees," the official added, referring to 31(a) transaction fees paid by traders on each sell trade they are currently required to report.

The reduction in overall transaction fees, in fact, is viewed as the major driving force behind the NASD's proposal.

On a broader front, traders are still fighting for wider relief from Section 31 fees which cover 31(a) fees on Nasdaq. [see story on page 12]

The NASD official said a trade typically becomes riskless as soon as the market maker has instructions to work a customer order.

"You can't measure risk in the number of seconds," the official explained. "At the time of execution, is the firm putting its capital at risk? If you have an order in hand, then you are not at risk."

The rule will cover the reporting of riskless principal transactions in the Nasdaq National Market, the Nasdaq SmallCap Market, Nasdaq convertible-debt securities, and non-Nasdaq OTC equity securities. The official stressed that the NASD will show "good judgment and sense" to make sure that firms can implement the new rule without problems.

The proposed rule amendment is said to have the support of SEC Chairman Arthur Levitt and SEC Director of Market Regulation Richard Lindsey.

If the amendments are approved, certain matching principal trades would be included within the definition of riskless, and reported to the public tape only once.

For instance, an amended rule would affect orders executed under the parameters of the order handling rules, which require market makers to display customer limit orders in their public quotes. Those orders are often filled by the market maker when that quote is accessed by another market participant.

Because market makers generally trade exclusively for a principal account, two separate transactions occur when they do a single trade one with a market participant and another directly with the customer. Both of these transactions are currently reported by market makers. The NASD is pressing to allow that type of trade to be reported as a single print.

In addition, the NASD now views a riskless principal trade as one that can involve two distinct orders the execution of one being dependent upon the receipt or execution of the other.

An amended rule would mean that a transaction can be defined as riskless when a market maker is holding an order from a customer, another member, the customer of another member, or any other entity including non-member broker dealers.

At the moment, market makers are deemed to be "at risk" when trading for their principal accounts. Non-market makers generally do not report all principal trades under current rules. No reporting is required for riskless trades.

The rules and resulting reports serve several purposes. They form the basis for public dissemination of last-sale transaction prices to the tape. Trade reports also are an essential part of the audit trail used by the NASD in fulfilling its regulatory responsibilities.

The Proposed Rule Change

By
Editorial Staff
-

The National Association of Securities Dealers' filing with the Securities and Exchange Commission on riskless principal trade reporting proposes the following amendments to the current reporting requirements: Market makers would be exempted from reporting riskless principal trades in the Nasdaq National Market, the Nasdaq SmallCap Market, Nasdaq convertible-debt securities, and non-Nasdaq OTC equity securities. The rule is subject to SEC approval.

The rule's proposed new language follows, and is underlined; proposed deletions are in brackets:

Exception: A "riskless" principal transaction in which a member [that is not a market maker in the security], after having received [from a customer] an order to buy a security, purchases the security as principal [from another member or customer] at the same price to satisfy the order to buy, or, after having received [from a customer] an order to sell, sells the security as principal [to another member or customer] at the same price to satisfy the order to sell, shall be reported as one transaction in the same manner as an agency transaction, excluding the mark-up or mark-down, commission equivalent, or other fee.

How Trade-Reporting Rule Helps Market Makers

By
Editorial Staff
-

If approved, how would the proposed amendment to the riskless principal trade-reporting rule benefit market makers? The National Association of Securities Dealers provided the following examples in its recent filing published in the Federal Register:

Example 1. A market maker, MM1, holds a customer limit order that is displayed in its quote to buy 1,000 shares of ABCD at $10 a share. A second market maker, MM2, sells 1,000 shares to MM1 at $10. MM2 reports the sale of 1,000 shares as required under current rules. MM1 then fills its customer order for 1,000 shares. Under the proposed rule, the first trade would continue to be reported (by the selling firm MM2 in this case, as required under current rules), but the second leg between MM1 and the customer would not be reported, as it is deemed riskless.

If the first execution were through a Nasdaq facility which automatically generates a trade report to the tape, such as SOES or SelectNet, no member would report at all. Members may still need to submit a "clearing only" entry into ACT [Nasdaq's Automated Confirmation Transaction system] to complete a transaction with a customer, but these submissions are not to be entered for reporting purposes, and thus there will be no public trade report for this leg of a transaction.

Example 2. An institutional customer presents a large order to a market maker, MM1, to sell 100,000 shares of XYZZ, with instructions to work the order, subject to a price limit, rather than execute it immediately in its entirety. MM1 may attempt to solicit interest from other parties to fill the institutional order, in whole or in part. A second market maker, MM2, may find a willing buyer, but for only 75,000 shares, at a price of $12 a share.

MM1 may determine to fill the entire customer order for 100,000 shares at $12 at that time (exclusive of any markdown, commission equivalent or other fee) by trading the 25,000-share balance out of inventory. There will still be two separate trade reports under the proposal because only a portion of the customer execution is deemed riskless. The size of the trade reports, however, will be adjusted to exclude the riskless portion.

Specifically, instead of MM1 reporting these as a market-maker sell transaction of 75,000 shares, and then a market-maker buy from the customer for 100,000 shares, these trades would be reported under the proposal as a market-maker sell transaction of 75,000 shares, and then a market-maker buy from the customer of only 25,000 shares.

Example 3. In another variation of the above example, a market maker, MM1, while holding an institutional customer order and working it on the customer's behalf, may obtain several executions to satisfy the order by selling to other market participants at varying prices throughout the trading day. In this example, assume the entire order is filled with these individual executions.

Because MM1 is the seller in these executions, it has the trade-reporting responsibility and will continue to report under current rules each individual component trade with other market participants as they occur. Under the proposal, however, MM1 would not report a transaction with the customer, as the execution used to satisfy the order had already been reported to the tape, although the transactions may be confirmed out to the customer at an average price of the component executions, to the extent permissible under Securities and Exchange Act Rule 10b-10.

Section 31 Relief Is on Shaky Ground

By
Editorial Staff
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A high-stakes campaign by the Security Traders Association and other industry participants to reduce the amount of money raised under Section 31 transaction fees seemed unlikely to succeed as the current Congressional session winded down.

At presstime, only a handful of days were left on the legislative calendar with lawmakers' attention focused on more pressing matters than Section 31 relief, among them Congressional elections, President Clinton's threatened impeachment, appropriations bills and tax cuts.

However, at least one dogged lawmaker was still waging a battle for relief.

Rep. Gerald Solomon (R-N.Y.), chairman of the House Rules Committee, was pressing his Republican colleagues who serve on a Senate-House securities-litigation, reform-legislation conference committee to add Section 31 cuts to the conference report.

Solomon, who was awaiting a Congressional Budget Office analysis, told Traders Magazine he would score his proposal as revenue neutral. He felt this would give him the ammunition needed to convince his Congressional colleagues about the wisdom of adding Section 31 language.

Even so, two Republican members of the conference committee, who requested anonymity, said in mid-September that Section 31 relief was doomed in their conference. They declined to elaborate.

The problem, explained David Franasiak a partner at Washington-based law firm Williams & Jensen, retained by a Section 31 coalition of 40 members, comprising the STA, U.S. stock exchanges and others is the scope of the Senate-House conference. Adding Section 31 to the bill would make it subject to a point of order on the Senate floor. "No one wants to be seen as jeopardizing or actually bringing it [securities-litigation reform] down," Franasiak said.

Solomon said his fall-back position would be the addition of Section 31 provisions to the Republican's $80 billion tax-cut bill, which was expected to sail smoothly through the House.

He would first have to sell the idea to House Ways and Means Committee Chairman Rep. Bill Archer (R-Texas), however. Even if Solomon is successful, the tax bill faces an uncertain future in the Senate, and President Clinton has already threatening to veto it.

Unfortunately for traders, 1998 may have been the most opportune time for getting Congress to act on fee cuts.

"There really is a small window of opportunity," Franasiak said. "It will be twice as hard to get relief next year when the fix will be much more costly. It's going to cost revenue because of our peculiar budget-scoring rules."

Section 31 fees and registration fees, which are meant to fund the Securities and Exchange Commission, are now said to exceed the agency's budget by some 324 percent. "[All of this money] is certainly not going to the SEC," Franasiak quipped. This explains why the appropriators on Capitol Hill are opposed to the Solomon and Menendez bill, he added.

Securing Solomon's support proved to be a notable political accomplishment for the STA.

From that point, the STA lobbying began to make noticeable headway because Solomon proved to be as good as his word. He filed Section 31 legislation, the Savings and Investment Relief Act of 1998, and enlisted Rep. Robert Menendez (D-N.J.), whose district includes Jersey City's Wall Street community, as his primary co-sponsor.

But the STA did not rest on its laurels. It was able to get every member of the House Republican leadership, with the exception of House Speaker Rep. Newt Gingrich (R-Ga.), who does not customarily co-sponsor legislation, to sign on to the Solomon and Menendez bill. The bill eventually found 55 co-sponsors, including a number of liberal Democrats.

Meanwhile, the U.S Chamber of Commerce and the National Federation of Independent Businesses declared their support for the Solomon and Menendez bill. Even the tax-reform crowd, including Americans for Tax Reform and Citizens for a Sound Economy, jumped on board. "These are groups that normally don't get involved in securities issues," Fransasiak noted.

Despite the strong possibility that relief will be not provided soon, political analysts note the money spent fighting Section 31 fees won't be wasted. The view is that when other issues are brought to lawmakers' attention, Capitol Hill will be aware that the trading community has clout.

Fast Track

By
Editorial Staff
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*USCC Trading the former Nash, Weiss & Co. hired Robert Donato as a sales trader and John Whalen as an equity trader. Donato was previously a sales trader at Knight Securities in Jersey City. Whalen joined USCC Trading from CIBC Oppenheimer in New York, where he traded on the equity desk.

Both Donato and Whalen will report to Neil Feldman and James J. Welsh. Feldman is USCC Trading's president. Welsh is chief executive officer of the Jersey City-based firm, and assists Feldman in the management of the trading floor.

*After eight years at Neidiger, Tucker & Bruner in Denver, Fred Ott moved cross-town to join EBI Securities Corp. as an equity trader. Ott was previously an institutional trader at Neidiger Tucker.

EBI Securities Corp., the former Cohig & Associates, is owned by Viennese firm East Broker International.

nHoward Kramer left the Securities and Exchange Commission to join the Washington law office of Schiff, Hardin & Waite as a partner. Kramer had most recently served as senior associate director of the Division of Market Regulation at the SEC.

*D.A. Davidson & Co. in Portland hired Corey Hughes as a senior over-the-counter trader. He was previously an OTC trader at Ragen MacKenzie in Seattle.

Hughes will report to Jim Volk and Dan Baker, who co-manage the trading desk at D.A. Davidson. Volk said the firm also plans to hire a sales trader.

*Jeff Schaefer left the Securities Industry Association after more than two decades of service to join Midwood Securities as a senior economic advisor. Schaefer was most recently director of research at the New York-based trade organization. Midwood Securities is a New York institutional brokerage firm.

*LIMITrader Securities, a Princeton-based firm launching an electronic bond-trading system this fall, hired three new executives: Robert Stoner, J. Randall Burwell and Joseph M. Krupp Jr.

Stoner joined the firm as director of sales. He was previously vice president of sales at InterVest Securities in Berwyn, Pa. Burwell, formerly head of North American origination for medium-term notes at HSBC Securities in New York, was named managing director and head of capital markets at LIMITrader. Krupp was hired as a principal and senior sales executive. Krupp was previously a principal in the fixed-income department at BT Alex. Brown & Sons in New York.

Stoner, Burwell and Krupp will report to Edwin J. McGuinn, LIMITrader president and chief executive.

*Arthur Raskin and John McRae joined Cantor Fitzgerald & Co. in New York as senior vice presidents. Raskin, formerly a convertible-bond portfolio manager at AIG/Soundshore in Stamford, will serve as chief equity hybrid trader. McRae will serve as head equity hybrid research analyst at Cantor Fitzgerald. McRae was previously a senior analyst in the convertible-securities department at New York's Salomon Smith Barney.

*James C. Curvey was named president of Boston-based mutual-fund giant Fidelity Investments. Curvey is currently chief operating officer of Fidelity's parent company, FMR Corp. He will continue in his role as COO at FMR Corp. Curvey, 63, has been an employee of Fidelity and FMR Corp. since 1982.

*The Chicago Stock Exchange (CHX) hired James A. Blanda to be its chief financial officer. Blanda will be responsible for all of the CHX's financial matters. Before joining the CHX, Blanda was a vice president and corporate controller at Sears, Roebuck & Co. in Chicago.

* Scott P. Mason, president and chief executive of New York-based Investment Technology Group (ITG), died at his Wellesley, Mass. home on September 8 after a battle with cancer. He was 50.

Mason was named president and chief executive of ITG in 1997 after a decade-long relationship with the brokerage firm as a consultant.

In a public statement, Raymond L. Killian, chairman of ITG, said: "Through Scott's vision and inspiration, ITG has flourished. He will be missed greatly as a friend, a colleague and a leader."

Prior to joining ITG, Mason had served as chairman of Harvard University's business school from 1993 to 1997. He was also a member of the Harvard faculty from 1980 until 1993. Mason was credited with introducing financial engineering the use of mathematical models to value securities into the Harvard business curriculum.

Mason is survived by his wife Linda, and their two children, Meredith, 16, and Aaron, 12.

* Nationsbanc Montgomery Securities named Carter McClelland co-head of investment banking in New York. McClelland was formerly co-head of global investment banking at Deutsche Bank in New York.

Big Board’s Space Shortage Is Hurting Flow of Visitors

By
Editorial Staff
-

The space crunch at the New York Stock Exchange is dampening the flow of visitors onto its crowded trading floor.

Trooping onto the floor is usually no big deal for guests of Big Board members. On the day assigned, a guest gets a stick-on identification badge, is checked by security, and then is elbowed onto the floor by a hapless tour guide.

Now with traders packed like sardines inside the venerable exchange, the Big Board can no longer easily accomodate the number of guests it once did in the past, the head equity trader at a member firm said.

"Bringing visitors onto the floor was no problem in the past," said the trader, who declined to be named. "Now, the exchange is trying to curtail them. We are basically being told to discourage the numbers coming down."

At peak times, the 36,000 square-foot exchange floor, located on the corner of Wall Street and Broad Street in lower Manhattan, bustles with 4,000 trading professionals.

"Extra floor space was added in 1989 when the Blue Room was expanded. With volume and business soaring, we have outgrown that extra space, and more and more people are jammed together," the bewildered trader said.

New Floor

The space crunch illustrates the Big Board's desperate need for new digs and additional room. Speculation is rife that the Big Board is eyeing a new trading floor a block away from its current site. That site is most of the block encircled by Broad, Beaver and William Streets, and Exchange Place, according to sources quoted in a business story in New York's Daily News.

The whopping $1 billion deal, expected to be completed as early as this month, was brokered by city and state officials, according to the same story. The story says plans call for the Big Board to turn the existing exchange space into office accomodations, and the new space into a high-tech trading-floor showcase. Bruce Menin, owner of one of the buildings eyed for accomodation, said a deal is imminent.

Asked to comment on the report, a city official said during a regular City Hall news conference that the City of New York was not involved in the reported negotiations.

If the deal does not materialize, others speculate that the exchange will expand its current trading floor, adding the floor once used to trade futures, options and bonds, and now used for backoffice processing.

Walkway

The old floor at 30 Broad Street is situated in a building partially leased by the Big Board, and linked to the main building by a walkway. The new space would give the Big Board an additional 8,000 square feet.

Other possibilities are said to include relocating the trading operations onto a site in nearby Battery Park City, and across the Hudson River in New Jersey. A spokeswoman for the Big Board told Traders Magazine that the exchange "continues to keep its options open."

Bloomberg Warns That SEC Could Create Central Market

By
Editorial Staff
-

Bloomberg has warned that a Securities and Exchange Commission proposal for regulating alternative trading systems (ATSs) could create a centralized Nasdaq-run market that sends execution messages instead of orders to ATSs.

In a bluntly-worded comment letter on one of the two SEC proposals for regulating ATSs, including electronic communications networks, Bloomberg stated: "Taken to its logical and practical conclusion, such centralization of the market could severely truncate, if not eliminate, the role of ATSs, and stifle competition."

The centralization of the market would be the direct result of enhanced regulation of ATSs as broker dealers as envisaged in the SEC proposals, the market-data giant maintained. (The current crop of ATSs includes Bloomberg's electronic communications network Bloomberg Tradebook.)

"By mandating delivery of executions from a central market, the central market itself would become a monopoly and would set the market standard at the lowest common denominator for efficiency, technology and service," the Bloomberg letter stated.

"In the process," Bloomberg added, "Nasdaq could extract monopoly rents from the market participants that were subservient to it, and would not be disciplined by the threat of effective competition."

Bloomberg also takes issue with the second proposal for the regulation of ATSs as de facto exchanges, warning that the proposal could

subject the ATSs to "a variety of entrenched market forces that might well be more problematic and impractical for ATSs than operating as a broker dealer under the status quo."

The best approach to regulating ATSs, Bloomberg believes, is to leave the current arrangements basically unchanged, an approach favored by the Securities Industry Association.

In a public comment letter, the SIA said the current framework has "worked successfully to allow the development of innovative trading systems." The public comment period on ATSs recently ended.

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