The proposed distribution of a record-breaking $1.03 billion in the Nasdaq price-fixing lawsuit is scheduled for consideration September 9 by Federal District Court in New York. The proposal will be filed by attorneys representing investors whose May 1994 lawsuit accused 37 Nasdaq market makers of conspiring to artificially widen spreads.

Notifying investors that qualify as members of a court-certified class required a mail campaign to several million former customers of the accused firms.

The market-making firms assisted in the outreach. Additionally, a $1.9 million national advertising campaign helped track down potential class members.

"This is apparently the largest recovery in the history of federal or state anti-trust laws," said co-lead plaintiff attorney Arthur M. Kaplan in a prepared statement. "Now the job is to provide notice about the settlements and the 1,659 class securities [at issue in the case] to investors."

Subject to court approval, attorneys for investors will send a notice to class members proposing a plan for allocation and distribution.

The New York Stock Exchange implemented new circuit-breaker trigger levels on July 1 for the third quarter of 1998. Based on the current level of the Dow Jones Industrial Average, the new triggers on a ten percent, or 900-point decline will halt trading for one hour before 2 p.m, and for 30 minutes between 2 p.m. and 2.30 p.m. The circuit breakers will not stop trading on a 900-point decline between 2:30 p.m. and the session close at 4 p.m.

A 1,750-point dip, or 20-percent Dow decline, will halt trading for two hours if the decline occurs before 1 p.m. Trading will stop for one hour with a 20-percent dip between 1 p.m. and 2 p.m. And trading will halt for the remainder of the day if a 20-percent decline occurs between 2 p.m. and 4 p.m.

A 2,650-point decline, or 30 percent Dow drop, will halt trading for the remainder of the day, regardless of when the decline occurs.

The NYSE circuit breakers were triggered for the first and only time on Oct. 27, 1997, in a seven-percent Dow decline.

The lukewarm regard many Nasdaq traders have for the National Association of Securities Dealers is almost legendary. But animosity notwithstanding, some traders this month singled the NASD out for special commendation for fighting a controversial Nasdaq transaction fee.

The NASD's effort itself the direct result of intense lobbying by a coalition led by the Security Traders Association is expected to result in Securities and Exchange Commission rulemaking that reduces 31(a) transaction-fee collections on riskless principal trades.

Among critics of 31(a) fees on Nasdaq, NASD Chairman and Chief Executive Frank Zarb has spoken strongly in favor of relief, while STA Chairman John Tognino has expressed the concerns of his own members.

A Little Jig

Meanwhile, some traders are doing a little jig over what seems like certain relief. "The NASD has listened to the STA and the market-making community," one regional market maker said. "This is a step in the right direction for further relief on 31(a)."

The 31(a) fees, authorized under the Securities Exchange Act of 1934, will raise more than $400 million from Nasdaq this year for the U.S. Treasury and indirectly for the SEC budget under current projections. An estimated $20 million roughly five percent of the total Nasdaq collection would be saved annually by market makers, pending SEC approval of the NASD measure.

Sources said the NASD is working on companion language that would bring further 31(a) relief on fees involving step-outs by market makers.

Officials at the SEC have indicated their support for the NASD's measures.

As previously reported, the NASD board of governors' recent approval of the measure would, in effect, count as one trade instead of two transactions the buying and reselling of a Nasdaq stock by a desk acting as principal when it is not a market maker in that stock.

The transactions are distinct from agency transactions because the market maker acts as a principal but assumes no risk. Market makers argue that riskless principal trades unfairly make them liable two times for the 31(a) fees (charged by the SEC at a rate of 1/300 of one percent for each sale.)

What's Riskless Principal?

At the moment, it is unclear what precisely will constitute riskless principal trades. A former director of the SEC's Division of Market Regulation, retained by the 31(a) coalition, prepared the following analysis:

"A riskless principal transaction, as defined by the NASD, would include only those situations in which a member of the NASD who has received from another member, or from a customer, an order to buy or sell a security, then purchases (in the case of a member or customer order to buy) or sells (in the case of a member or customer order to sell), as principal (that is, for its own account), the same security from or to another member to satisfy the original member's or customer's purchase or sale order."

The analysis argues that the SEC's interest in riskless principal purchases and sales arises because such transactions generally inflate volume reporting by the NASD. This is because such transactions in reality amount to only one and not to two trades.

One likely outcome of the NASD-proposed rule is a reconfiguration of how Nasdaq counts trades on riskless principal transactions. That would likely result in an average dip of ten percent in the official tally for Nasdaq daily volume, according to several experts.

Meanwhile, Sen. Judd Gregg (R-N.H.), chairman of the Senate Appropriations Subcommittee on Commerce, Justice, State and Judiciary with jurisdiction over the SEC budget has backed down from his earlier opposition to reductions in 31(a) fees. Gregg said he now favors a deal between the SEC and representatives of the trading community.

"I think it would be better if he [SEC Chairman Arthur Levitt Jr.] did it and the SEC did it in a regulatory framework rather than legislatively," Gregg told Traders Magazine. "I've pretty much left it to him to work out the numbers and get back to me."

Gregg, a target for 31(a) lobbyists, is standing for reelection in November. Having barely edged into office with 50 percent of the state vote in 1992, he is sounding conciliatory these days on 31(a) issues in the run-up to the November election, Capitol Hill sources said.

Indeed, Gregg said he had a cordial meeting recently with Levitt on 31(a) fees. "I think we are on the same wavelength, so I'm comfortable with Levitt taking the lead on the issue and trying to work it out."

In the House, Rep. Gerald Solomon (R-N.Y.), chairman of the House Rules Committee, introduced legislation that would further reduce 31(a) fees. At press time, Solomon did not return telephone calls seeking comment. Earlier this year, he announced his intention to leave the House at the conclusion of the current term, his tenth.

Separately, the 31(a) coalition has been pulling out the stops at a grassroots level, according to several activists. Members of the coalition have met with congressional leaders in Florida, Minnesota, New Jersey, North Carolina, Ohio and South Carolina to muster support.

The following is a draft of the proposed changes in National Association of Securities Dealers trade-reporting rules for over-the-counter stocks, including stocks traded on Nasdaq, the OTC Bulletin Board and the pink sheets, as amended by the NASD. The changes would reduce 31(a) transaction fees on riskless principal trades, pending Securities and Exchange Commission approval. Deletions are in brackets, and new language is underlined.

A "riskless principal transaction" in which a member [that is, not a market maker in the security], after having received from a member or customer an order to buy a security, purchases the security as principal from another member or customer to satisfy the order to buy, or, after having received from a member or customer an order to sell, sells the security as principal to another member or customer 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.

ART-

In cost-efficiency drives in the last two years, some large Nasdaq market makers dropped thinly-traded stocks, citing shrinking profitability since the introduction of the order handling rules. Most of these stocks are still traded, however, often by smaller regional firms that specialize in the issues.

But could some stocks, the blue-chips included, be temporarily suspended from Nasdaq because of incomplete disclosure in its regulatory filings?

The possibility is not too far-fetched, according to some experts. Blame the Year-2000 bug.

That's because some publicly-traded companies are dragging their heels on Year-2000 compliance, sitting atop computers not equipped to correctly process data in the new millennium.

The upshot is that broker dealers, if not NASD Regulation the regulatory unit of the National Association of Securities Dealers could start dropping or delisting stocks that are not Year-2000 compliant.

A Capitol Hill hearing June 10 on the Year-2000 problem convened by Sen. Robert Bennett (R-Utah), chairman of the financial-services and technology subcommittee, made this much clear: compliance officers and securities analysts will be kept busy grappling with the Year-2000 problem.

Some broker dealers will have to beef up their efforts to police against the peddling of stocks with questionable Year-2000 compliance. "I believe that corporations are still not providing their investors with the information they must have to assess the risks these companies face in 2000," Dr. Edward Yardeni, chief economist at Deutsche Bank Securities in New York and an expert on Year-2000 compliance, told Bennett's panel.

Publicly-traded companies are required to include statements about 2000 in annual and quarterly filings with the Securities and Exchange Commission. Yardeni has closely studied the importance of some of these disclosure filings.

Yardeni testified that he strongly disagreed with the stand taken by most corporate managers that Year-2000 compliance is not of material interest, and therefore does not require full disclosure.

To be sure, Yardeni said, the cost of adjusting for 2000 is not material because the money is coming out of current information-technology budgets. "However, the cost of failing to fix the problem could be very material, so investors must be kept informed, on an ongoing basis, about the potential for failure," he warned.

Market Makers

In a telephone interview with Traders Magazine soon after the hearing, Yardeni went on to say that market makers "are in the same position as investors, and should be asking questions about Year-2000 compliance. There is a widespread lack of information being provided."

Yardeni felt that the SEC needs to be tougher on compliance. "My sense is that the SEC is being remarkably passive," Yardeni added. SEC Commissioner Laura Unger, who attended the hearing, shrugged off that suggestion earlier, simply saying, "Traders know the questions they should be asking."

But the real tough questions could come from securities-industry analysts whose jobs are to review company financials. "Market makers don't call companies on earnings reports. It's something a securities analyst would do," one trader fumed in a telephone interview.

According to Yardeni's written testimony in a Worldcom Inc. annual report, the Nasdaq-listed company informed investors that at the moment, "the company believes that the cost of addressing Year-2000 issues is not material to its future operating results or financial position.

"In the event that any of the company's significant suppliers do not successfully and timely achieve Year-2000 compliance, the company's business or operations could be adversely affected."

Worldcom's quarterly Year-2000 statement was identical in scope to its annual report, Yardeni wrote.

"Did management learn anything that should have been disclosed to investors? Worldcom did not mention that it hopes to acquire MCI Communications, which also reports that Year 2000 isn't material, though the company did say it would spend $400 million in 1998 and 1999. MCI also noted that it expects to be compliant on or before Dec. 31, 1999.

J Patrick Campbell, a retired U.S. Air Force Command Pilot, who joined Nasdaq as executive vice president of market services in 1997, is again flying high. He has been named chief operating officer at Nasdaq.

In the newly-created post, Campbell will report to Frank Zarb, chairman and chief executive of the National Association of Securities Dealers, and to Nasdaq President Alfred R. Berkeley III.

"The extraordinary breadth of his expertise in the securities industry ensures that our members, issuers and the investing public will be well served by Nasdaq into the next century," Zarb said in a prepared statement.

Before joining Nasdaq, Campbell was a senior executive vice president and board member of The Ohio Company in Columbus, Ohio. Campbell started his Wall Street career at The Ohio Company in 1971, where he was responsible for equity trading, research, portfolio management, taxable fixed-income trading and the firm's trust business.

Campbell was awarded the Bronze Star and three air medals during his service with the U.S. Air Force.

Separately, Zarb announced the expansion of the Office of the Chairman. It will now include NASD Chief Information Officer Gregor Bailar, NASD Executive Vice President for Strategic Development John Hilley, NASD Deputy Chief Operating Officer Salvatore Sodano, NASD Regulation COO Elisse Walter and Campbell.

PaineWebber named Stephen Mortati head of over-the-counter trading. Previously head of Nasdaq sales trading at ABN AMRO Incorporated, Mortati will remain based in New York.

Greg Prime also joined the New York OTC desk at PaineWebber as a sales trader. Prime was previously a sales trader at San Francisco-based investment bank Hambrecht & Quist.

And Donnie Daniels and Dave Hylka were named OTC traders at PaineWebber in New York, reporting to Patrick Davis, head of OTC trading. Both Daniels, at Robinson-Humphrey, and Hylka, at Salomon Smith Barney, were previously New York-based OTC traders.

Jim Quinton joined Avalon Research Group, a Boca Raton-based institutional research boutique and brokerage firm, as vice president of institutional research and sales. Quinton was formerly a vice president of institutional sales at Nutmeg Securities in Providence. He will be based in Avalon's Providence office.

The over-the-counter trading department at Josephthal & Co. in New York promoted three assistants to traders. Michael Beaver, Dave Holloway and Shkylar Pavel were named OTC traders, reporting to Lex Pomper, Josephthal's head of OTC trading.

Simon Spenser, an astrophysicist turned software developer, joined Jersey City's Knight Securites as a chief strategy and technology officer. Previously, Spenser ran the third-market division at New York's D.E. Shaw & Co. Spenser's hiring is part of a larger employment boom at Knight as the wholesaler prepares for its intitial public offering.

Dennis Kelly, previously a Nasdaq trader at Vector Securities in Chicago, was named head of listed trading at George K. Baum & Company in Kansas City.

Edwin J. McGuinn joined LIMITrader Securities in Princeton as president and chief executive. LIMITrader owned and operated by Greenwich-based Weeden & Co.'s Automated Trading Systems is an electronic bond-trading system. McGuinn is a former executive and manager at Chicago-based Rodman & Renshaw, and New York-based Lehman Brothers and Mabon Securities. He was most recently head of operations at InterVest Securities, a rival bond-trading network, in Berwyn, Pa.

Derek Bayarri moved cross-town to join the Boca Raton desk at J.W. Genesis Financial Corp as a position trader. Bayarri was formerly a position trader at Barron Chase.

Jersey City's Sherwood Securites promoted Peter Battaglia to vice president of broker-dealer sales trading. Battaglia was previously Sherwood's public-relations manager.Sherwood also hired Louise Thompson as a sales trader on the broker-dealer desk. Thompson, who will report to Battaglia, joined Sherwood from New York's D.H. Blair & Co., where she was an agency trader.

Ralph Davis was named director of sales and marketing at Dallas-based Capital Institutional Services. An employee of the institutional brokerage firm since 1988, Davis most recently served as its regional sales manager for northeastern New England. In his new role at Capital Institutional Services, he will oversee all sales, marketing and client service.

The Chicago Board Options Exhange (CBOE) promoted two employees, Carol E. Kennedy and Amy Zisook. Kennedy, previously director of public relations for the CBOE, was named vice president of corporate communications. Zisook, who will continue in her duties as the CBOE's director of civic and governmental affairs, was also named an exchange vice president.

Helene Pientek, formerly head of the agency desk at Salomon Smith Barney in New York, joined Fidelity Capital Markets across town. In her new position, Pientek is in charge of public relations at the firm.

Minneapolis-based Dain Rauscher Incorporated promoted 31-year Wall Street veteran Michael A. Cope to assistant director of equity trading. Cope, previously a senior sales trader at the firm, will help manage all equity-trading activities. Dain Rauscher has 47 traders in three offices, and makes a market in more than 380 stocks. Cope will remain based in Minneapolis.

John G. Kinnard & Company, the Minneapolis-based brokerage firm, hired Paul Hughes as a managing director and director of mergers and acquisitions. Hughes was previously managing director of mergers and acquisitions at Dain Rauscher in Minneapolis.

Knight Securities recently added four traders from other New York-area firms. Fred Ingles, Mark Toney and Brian W. Barry joined Knight's correspondent desk as broker dealers. Ingles was previously on the correspondent desk cross-town at Herzog, Heine, Geduld. Toney was a sales trader at Nash, Weiss & Co. in Jersey City before joining Knight. And Barry was previously an assistant trader at Whale Securities in New York.

Christopher J. Taylor joined the firm as an equity trader. Taylor was formerly an over-the-counter trader at Sherwood Securities in Jersey City. At Knight, Taylor will trade on the OTC desk.

New York-based Wit Capital Group appointed Ronald Readmond to manage its day-to-day operations. Readmond, previously an executive at San Francisco-based Charles Schwab & Co. and a former director at Wit Capital, was named president and chief operating officer of the online investment bank.

OptiMark Technologies attempting to launch the OptiMark Trading System, an institutional trade-matching system opened a new Toronto office. The office, located at 145 King Street West, has been chartered to develop the company's operations in Canada. OptiMark is based in Jersey City, and has offices in Boston, Chicago, Los Angeles, New York, San Francisco and Durango, Colo.

Allan Grolimund retired officially in 1990, ending a brilliant 40-year Wall Street career as the senior trading manager at the Delaware Management Company in Philadelphia.

So then what did he do? He fulfilled a life-long fantasy.

The Queens, New York native moved to Shohola, a sparsely-populated lakeside community at the foothills of the Poconos in Pennsylvania and recharged his Wall Street career amidst the rustling of deer and the chirping sounds of crickets.

Grolimund, the Wall Street pro, has never stopped working, nor has he slowed since starting in 1948 as a teletype operator at Merrill Lynch & Co. in New York.

Retirement Heaven

Now, at an age when his contemporaries are basking in retirement heaven, Grolimund, who's 69, has other passions besides endless rounds of golf, never mind trout fishing, in his beloved Poconos.

Sure, his feet are most definitely planted in rustic Sholola, a 90-minute drive from New York's George Washington Bridge, but his heart is still somewhere in the esoteric reaches of technical research.

"I know it sounds like every trader's fantasy to be out of the rat race, calling your own hours, being minutes if not seconds away from year-round recreation," explained Grolimund, as a mocking-bird sang in the background, "but you would be wrong if you didn't think I still like the action on a trading floor."

After retiring on a non-compete agreement with 28 years of service at Delaware and watching the assets of its group of mutual funds mushroom from $300 million to $25 billion Grolimund started his Fair Market Profile (FMP), a technical research advisory for buy-side and sell-side institutional traders and individual investors.

Adirondack-Style Home

FMP's Sholola office is Grolimund's timber-framed, Adirondack-style home, originally built back in 1928. The surrounding woodlands replace the hard concrete of Philadelphia.

Grolimund uses a list of 200 large-cap and medium-cap stocks for selecting a continuous FMP model portfolio of no more than 30 of the best upward-trending picks. Grolimund maintains the FMP model portfolio has appreciated 230 percent in the past five years, compared with a gain of 150 percent for the Standard & Poor's 500 index.

"We stress that price is the best indicator. Sounds simplistic, but you would be amazed at how most technicians are distracted by the newest or most convoluted analysis technique," said Grolimund, as a barn owl circled silently above his Sholola home and office.

"We tell our subscribers that there isn't anything sacred about our model," Grolimund added. "A superior configuration could probably be devised. We would love it if someone did. But our goal is to teach people how to pick their own positions wisely, using the techniques we have developed."

By day, Grolimund is usually glued to his computer screen or on the phone to affiliated offices in New York and New Jersey. Sometimes, he walks in the surrounding woodlands.

If a deer greedily eyes his wife's vegetable garden, Grolimund won't be bothered.

Aw shucks, he is likely to say, that's life in the fast lane.

Savvy institutional clearing firms have a new sales pitch: anonymity brokerage services.

The latest clearing broker to join the marketing bandwagon is New York-based Citicorp subsidiary Citicorp Securities Services (CSS), which has provided institutional agency-only brokerage and clearing services since 1984.

Citicorp's foray into clearing has been somewhat overshadowed by larger clearing outfits that capitalize on an image of size and service.

Now the planned implementation of the OptiMark Trading System initially for listed business may burnish CSS's image and help it snare more business, clearing experts suggest.

Driving this view is concern among some investment managers about OptiMark's basic design as a supercomputer that aggregates, executes and does not disclose the customer behind an institutional order.

At issue is fear that an investment manager runs the risk of leakage, or revealing valuable information behind a block trade if the manager clears through a firm that has proprietary equity positions. By the same token, agency-only clearing brokers do not take positions, providing investment managers more protection, experts say.

"Agency-only clearing brokers believe they can attract business from OptiMark users nervous about information being revealed," said one person familiar with the institutional clearing business.

Citicorp has signed an agreement with OptiMark and The AutEx Group, a division of Thomson Financial Services. The agreement will allow institutions to route orders to OptiMark via AutEx's TradeRoute, and to designate CSS as its clearing broker. (Thomson Financial Services is the parent of Securities Data Publishing, publisher of Traders Magazine.)

Earlier this year, New York-based Bank of New York's BNY ESI & Co., an agency-only broker and clearing unit for institutional clients, signed a similar agreement with OptiMark.

Nasdaq traders preparing for the National Association of Securities Dealers' Series 55 trader examination can turn to several training programs for help.

One was developed by the Atlanta-based Investment Training Institute (ITI), and is endorsed by the Security Traders Association, the umbrella group for more than 7,000 mostly U.S.-based equity professionals.

Similar courses are provided by the Securities Training Corporation in New York and Chicago's Dearborn Financial Training.

As of April 1, Series 55 accreditation has been required for Series 7 and Series 62 licensed representatives who trade in Nasdaq and non-Nasdaq over-the-counter securities.

Mandate

The regulatory mandate covers market makers, agency traders, proprietary traders in equity or convertible-debt securities, and professionals who directly supervise these activities.

The 90-question examination tests traders expertise in four areas: Nasdaq and market-maker activities, automated execution and trading systems, trade-reporting requirements and securities-industry regulations.

Deadline

Veterans had until May 15 to submit exemption forms to regulators, giving them until May 1, 2000 to pass the examination. Rookies, on the other hand, must sit for the test within 90 days of filing appropriate papers, the same period allowed veterans who missed the May 15 deadline.

Classroom instruction, costing $300 per student, is given for ITI's Series 55 program, while an alternative ITI self-study program is available for $150.

ITI is a subsidiary of Atlanta-based Dover International, a financial-services consulting firm. (The ranks of senior management at Dover include Washington-based executive vice president John Pinto, a former 29-year veteran of market regulation at the NASD.)

With the largest concentration of U.S. securities firms based in New York, Baruch College's Zicklin School of Business in the Big Apple is appropriately the principal site for ITI's classroom training.

Six Series 55 training courses will be held at Baruch this summer. Another four will be held until September at ITI's Atlanta headquarters.

Self Study

Meanwhile, Securities Training Corporation said it is selling self-study materials and classroom instruction for $150.

Supplementary classroom instruction is available for $150. Customized training is also available.

Dearborn Financial Training said it plans to offer study materials starting in the fall.