As STRIKE, the name on the hottest new electronic communications network (ECN) simply suggests, Bear, Stearns & Co. is planning for war a price war.

STRIKE, the ECN sponsored by Bear Stearns, is going live this summer backed by some of the New York-based firm's Wall Street peers. And millions of dollars and potential profitability are at stake.

Arthur Pachecho, Bear Stearns' co-head of Nasdaq trading, and president and chief executive of the firm's affiliated STRIKE unit, said the new ECN is being marketed as an attractive alternative to Instinet and other ECNs.

Commissions

STRIKE's best weapon may be its commission schedule. Pachecho said STRIKE will charge customers "substantially" lower commissions for executions than its competition, but declined to elaborate.

Instinet, owned by London-based Reuters Group PLC, is the largest ECN approved by the Securities and Exchange Commission under terms of the order handling rules, and accounts for an estimated 20 percent of the average daily volume on Nasdaq, or more than 100 million shares.

Instinet's average commission charges are lower on heavy volume and generally amount to pennies or less on each share per trade executed.

STRIKE, which was approved by the SEC last January, thinks it will soon keep pace with Instinet's volume, thanks to a potential pool of lucrative order flow, including a network of more than 400 fully-disclosed Bear Stearns correspondent brokers that clear and execute business through the firm.

Bear Stearns' transaction volume is comparable to Instinet's, roughly 140,000 equity trades daily and about 12 percent of the business on the New York Stock Exchange.

Moreover, STRIKE is counting on order flow from some of the 15 equity participants and partners in the venture, including Wall Street giants Herzog, Heine, Geduld, Salomon Smith Barney, Donaldson, Lufkin & Jenrette, NationsBanc Montgomery Securities and Cantor Fitzgerald. (Sun Microsystems and NeoVision are also partners.)

"The nature of the owners means we can achieve significant critical mass," said Pachecho, the soft-spoken 34-year veteran who will vacate his seat on the desk this summer to concentrate fully on STRIKE.

In addition, STRIKE will be available through more than 60,000 Bridge terminals, a move that gives the soon-to-be-launched ECN a widespread reach.

Plans Hatched

Plans for STRIKE were first hatched in the wake of the order handling rules that made Nasdaq price-quote information more transparent.

Now a customer sending a better price on a stock to a market maker is assured that an order will be publicly exposed or executed by the market maker.

The market maker must either fill the customer's order, change its own quote to reflect the customer's superior bid or asked price, or transmit the customer's order to an ECN.

Bear Stearns' STRIKE plan was motivated by that ECN display option, and a calculation that it is more cost-effective to use its own ECN rather than a competitor's, which then collects the agency commission. An average-sized Nasdaq desk may pay Instinet and other ECNs several million dollars annually in commissions.

"There have been significant changes in the regulatory environment. Many changes are beneficial to the investors, of course, but at the same time, market making is much more expensive," Pacheco said.

"Costs are up and profits are down. One of the costs of doing business is the use of ECNs. The new [order handling] rules opened up competitive windows and prompted us to compete with the existing ECNs," he added.

The ultimate effect of having a new gorilla in the ECN business is not exactly clear. Some experts point out that volume on all ECNs has not increased appreciably since the order handling rules, raising the possibility that some ECNs will see a serious erosion in market share.

What's more, the National Association of Securities Dealers' proposed integrated order-delivery and execution system has raised more fears that business on ECNs will be crimped if the system is implemented.

Nevertheless, the ECN industry has some feisty competitors. Other ECNs launched after the rules took effect include Bloomberg's Tradebook and Automated Securities Clearance Corp.'s BRUT. Last October, the SEC and NASD approved an ECN that is operated by New York-based Spear, Leeds & Kellogg.

Newest Upstarts

Among the newest upstarts, BRUT, or Brass Utility, has also engaged in a price war of sorts. The system, which was recently approved by regulators, essentially "rewards" traders for using the ECN.

On a trader-to-trader transaction, for example, the trader entering the order into BRUT will be paid $1, while the broker taking liquidity from the system would be charged $4.

Thus, a 5,000-share transaction would cost a mere $3, compared to ten times the cost of doing the same transaction on alternative ECNs, according to a BRUT official.

BRUT is pitched as a customer service by Weehawken, N.J.-based Automated Securities Clearance, or as an accessory to order-management and routing software the company sells to market makers (that product handles a large proportion of Nasdaq business). But for Bear Stearns, ECNs are a means of remaining in business.

Bear Stearns, however, has an obvious advantage over other ECNs that do not have the luxury of a ready-made critical mass of order flow. "New ECNs really faces an uphill battle," one expert said. "Traders tend to think that time can be lost waiting for an execution if they send their orders to a smaller ECN."

The development costs for STRIKE, estimated by industry sources at $15 million to $20 million, were paid by Bear Stearns, Pachecho said.

"Even though Bear Stearns has borne the costs, STRIKE is not exclusively owned by the firm," Pacheco stressed.

Java Programming

STRIKE software is written in Java programming language, developed by Sun Microsystems. All applications or software written in Java can be deployed on any platform.

In other words, STRIKE will work equally on a PC, Macintosh or a UNIX computer. The only requirement is a Java-powered browser, such as the latest version of Netscape Navigator or Internet Explorer, both of which are available free from their respective web sites.

Traders can access STRIKE through their order-entry screens on Bridge terminals. Additionally, a fixed API (a type of application) enables companies to integrate the ECN into their trade-order blotter and backoffice software. Like other compliant ECNs under the order handling rules, STRIKE will be linked to Nasdaq via SelectNet.

Users will be able to access the system initially through a secure proprietary network developed by Bear Stearns, or through networks provided by Bridge, according to Bear Stearns marketing material.

Pachecho is confident. "[In most cases] traders do not have to invest in new software or hardware, or in expensive real estate, to access STRIKE," Pachecho said. "STRIKE is ready to roll."

Instinet: Owned by London's Reuters Group PLC, Instinet is one of the oldest and largest electronic communications network (ECNs). Founded in 1969, Instinet was acquired by Reuters in 1987, and now has offices in eight major financial centers worldwide. As a reigning champion, it is the target of every competing ECN, even though it has not seen any major impact on its business. The trading community complains that Instinet crashes often.

Fee: Up to 1.5 cents per share for brokers.

Market Share: 69 percent.

TradeBook: Owned by Bloomberg, the system is more than 15 months old. With 100,000 Bloomberg terminals in place, many thought it was the ultimate competitor for Instinet. However, it is still going through its early childhood. Still, a formidable competitor.

Fee: Up to 1.5 cents per share for brokers.

Market Share: Seven percent.

Island: Originally favored by electronic day-trading firms, it is one of the reasons Internet-based brokerage firm DatekOnline has faster access capability than its rivals. Not to be underrated.

Fee: $1 per trade execution.

Market Share: 20 percent.

Archipelago/Terra Nova: Used by options traders via handheld portable computers, though it is a minor player.

Fee: Up to three cents per share.

Market Share: Three percent.

Rating & Execution Dot Interface Book (RediBook): NYSE specialist firm Spear, Leeds & Kellogg's system, designed for institutions.

Fee: Not available.

Market Share: One percent.

Attain: Latest entry in the ECN market from electronic day-trading firm All-Tech Investment Group based in Montvale, N.J.

Fee: Up to 1.5 cents per share.

Market Share: Not available.

Coming Up Next

BRUT: The Brass Utility is developed by Automated Securities Clearance Corp., a Weehawken, N.J.-based company that makes Brass order-management and routing software, and Jersey City wholesaler Knight Securities (which has a minority interest).

Fee: Not available.

STRIKE: This ECN was developed by giant Bear, Stearns & Co. and a large consortium of Wall Street firms and technology companies. To debut later this summer, the system is seen as the next Goliath of the ECN world.

Fee: Not available.

Source: Traders Magazine research

The talent and resources of CDA/Spectrum and Technimetrics, two global leaders in providing institutional-ownership data to the financial markets, were recently combined to create an entirely new company to be called CDA/Spectrum. The new concern was created through the acquisition of Technimetrics by the Thomson Corp., the parent of CDA/Spectrum. In uniting the strengths of both organizations, the new CDA/Spectrum will achieve unrivaled data coverage and a delivery capability featuring an extensive array of products and services. The investor-relations advisory business of Technimetrics, also acquired by Thomson, will continue to be operated under the Technimetrics name.

CDA/Spectrum's principal product offerings to the financial-trading market include the Equity Gateway, an online service available via major market-data vendors. The recently released ShareWatch Gateway (see adjacent article) extends both the data coverage and functionality of the current Equity Gateway to meet the needs of today's financial-trading professionals. Additional CDA/Spectrum products include those developed using the Technimetrics ownership database. These products include Share/World via Unilink and Network Share/World, a client-server application. CDA/Spectrum plans to release another new product, Integrator, this summer. Integrator is expected to provide financial-trading institutions with an unbeatable combination of security-ownership data and information from Technimetrics' extensive database of institutions and contacts.

CDA/Spectrum is fast at work integrating the two ownership databases and organizations. As an initial step, the company is building a data-sharing capability. This phase of development will ensure that the sum total of data coverage is shared by all products by facilitating the transfer of information on securities, owners and holdings from one database to the other. All clients are expected to see improvements in data coverage and quality as a result of this initial effort. The second phase of development will involve the creation of an entirely new global-data repository to support both existing and future products.

With the combined resources and capabilities of two organizations, CDA/Spectrum is committed to raising the standard of its products and the services it provides to its clients. For information about how CDA/Spectrum can serve the needs of your organization both now and in the future, please contact CDA/Spectrum at (800) 232-6362.

CDA/Spectrum has announced the release of the next generation of its security-ownership solutions to financial-trading institutions. The new product provides users with an array of benefits previously unavailable in any product on the market. The ShareWatch Gateway will be powered by state-of-the-art, high-capacity servers configured to maximize system performance and stability. CDA/Spectrum understands the need of financial-trading professionals for instantaneous access to the kind of high-quality data that helps to drive decisions. The ShareWatch Gateway answers this need with superior performance at the desktop.

With the ShareWatch Gateway, CDA/Spectrum has succeeded in creating a product in tune with the current demands of the market. The benefits of the product include its integration of CDA/Spectrum's entire database of ownership information in a single application. Users of the new system will save an enormous amount of time using functionality that enables them to pinpoint sales and trading opportunities. For example, users can create their own client lists and match those lists to securities on their firm's Buy-Sell-Focus list. Accessing important names, titles and telephone numbers of contacts at institutional owners will be easier than ever before with the new Contacts Report. Users can even segment various reports based on filtering criteria such as geography, exchange or even type of institution.

The ShareWatch Gateway is available via major market-data vendors and a web browser. Browser access is provided over the Internet and through private links to the CDA/Spectrum network. For additional information about this powerful new sales and trading productivity tool, contact CDA/Spectrum at (800) 232-6362.

Some of the most important technological changes on equity-trading desks are only a few years old.

New systems and procedures, meanwhile, constantly enhance the productivity and performance of every trader.

Paperless trading, electronic order routing and a computer protocol dubbed the Financial Information Exchange, or FIX, are good examples.

Innovation is absolutely breathtaking, and the speed at which machines become obsolete is more stunning than ever before.

Wall Street is a hotbed of technology spending. The spending is of gargantuan proportions. And it shows no sign of slowing down.

Not convinced? Just consider the Securities Industry Association's Technology Management Conference and Exhibit at the New York Hilton, June 23 to June 25.

Visitors will discover vendors presenting products and services in areas such as wireless communications, workstation furniture, training, information storage and disaster recovery.

The conference is not short on variety, or of attendees with checkbooks stuffed into bulging briefcases.

As Pim Goodbody, the SIA's vice president of management services, wryly observed to Traders Magazine, "This is the place where industry pros can come to get answers to their most pressing technology questions."

Of hundreds of products exhibited, traders and trading-floor managers will be eagerly eyeing the next generation of trading systems, which promise to streamline operations and boost productivity.

OMR Systems Corp., based in Princeton, N.J., is showcasing the Trading Assistant, its front-to-back trade-processing engine that supports multiple trades from a single-entry screen.

The engine's processing capability includes trade validation, advice and payment processing and accounting usages.

The technology is compatible with the Financial Trading Network, which links individual trading-assistant systems on a trading floor or in seperate locations via messaging technology.

Midas-Kapiti International will highlight its Windows NT-based Front Office DBA trading system. The London-based company says its product is designed to eliminate the expense and confusion of running different applications for a series of specific tasks.

Consisting of independent but integrated components, Front Office DBA delivers real-time and historical market data and news, performs sophisticated pricing and market-risk calculations and automates deal capturing and position keeping all on a single workstation.

Front Office DBA offers traders access to real-time spreadsheets, graphic technical-analysis capabilities, free seating and support for occasional users. Other features include straight-through processing to the backoffice, market-risk management and the ability to expand support into various financial markets.

Trintech Systems, based in Stamford, CT. is showcasing a wide range of trading technologies. FloorLook is the company's electronic quote-routing system, connecting traders to the floor of the New York Stock Exchange.

Trintech's FloorReport supports the management of orders and executions between traders and exchange-floor operations, while its FIXTrader provides order management and routing for both buy-side and sell-side institutions.

Other Technologies

While trading systems take center stage, other technologies will certainly draw the attention of this year's crowd. Several companies are presenting new desktop display technologies.

Acton, Mass.-based Pixelvision is demonstrating its SmartGlas flat-panel display, which maximizes display space while minimizing eye strain.

Designed to replace bulky CRT monitors, SmartGlas resembles a thick sheet of glass and can be mounted on a desktop or wall.

The device allows traders to control more than 30 inches of high-resolution screen area from a keyboard or mouse. SmartGlas is designed to let traders view multiple applications simultaneously, and work collaboratively.

The display combines multiple-information tiles in an electronic mosaic, giving traders quick access to financial applications. The product also offers high brightness and wide-viewing angles, allowing traders to monitor applications and data whether they're standing or sitting from previously obstructed side angles.

Value Displays

Another SIA vendor will demonstrate how companies can derive more value from conventional displays. For the past 11 years, Colorgraphic Communications has been a leader in the design and manufacturing of multiple-display technologies for numerous vertical markets.

At the SIA show, the Atlanta-based company will introduce the Twin Tuna, a product that aims to combine innovations in multiple CRT screen-display technology with real-time video overlays. The plug-in PC card will allow traders to display their financial windows across two monitors. Users can also watch multiple television channels, cameras or satellite feeds in fully scalable windows.

The Twin Tuna occupies a single, full-sized PCI slot and ships with support for Windows 95 and NT 4.0. Software that provides full control of video and audio properties is included.

On the database side, Soliton Associates, based in Toronto, will exhibit TimeSquare, a database manager for financial-market data. TimeSquare integrates the acquisition, management, verification and dissemination of market data into a single product.

The software is SQL-based, making it accessible from any trading environment. Designed specifically for managing time series, TimeSquare aims to deliver fast, efficient updates.

As computing power grows almost exponentially, market-data storage and analytical tools are gaining in speed and sophistication. Inventure will use the SIA event to showcase its Ranger Enterprise Architecture, an innovative new solution for the distributed integration of data and analytics.

According to the New York-based firm, Ranger serves as an attractive alternative to data-warehouse technology, integrating disparate data and analytics, and delivering them globally to traders and other users over a corporate intranet. Users can view and manipulate all Ranger-linked data and analytics through familiar desktop applications, such as Excel, or through more specialized power-user tools developed by consultants and software specialists.

Ranger is optimized for the fast and accurate analysis of large, time-aware data sets, such as stock-price histories. The product solves problems faced by every company operating in the financial markets: seamless integration of multiple databases, irrespective of format or physical location, rapid data access, complete real-time and historic data integration, powerful analytics and sophisticated visualization tools. Ranger is available in both Windows NT and Sun computing environments.

Quotation services are also benefiting from advancing computer and communications technologies. CQG for Windows, for example, will present its real-time, graphically-enhanced quotation service at the SIA show.

The New York-based company's CQG for Windows is a decision-support system that's designed to meet the needs of a wide range of traders. CQG for Windows is a 32-bit application that operates under Windows 95 or Windows NT.

CQGNet provides the application through a user's internal network. Market databases available through CQG for Windows include 1,800 of the most actively traded U.S. equities.

All U.S. equities, their options and selected foreign equities will be available by year's end. CQG for Windows also provides more than 80 technical indicators, including Market Profile, Elliott Wave and Tom DeMark Indicators. CQG for Windows data may also be exported to Excel.

Integrating disparate and incompatible trading technologies into a single, cohesive system is a thematic pitch among vendors at this year's SIA conference.

In this area, Software Technologies Corp. of Monrovia, Calif. is marketing DataGate, a system that provides guaranteed message delivery, secure Internet access, mainframe connectivity and NT and UNIX support.

DataGate enables different information systems to exchange data in real time, regardless of the network, platform, operating system or application.

The product's point and click graphical-user interface allows companies to build a complete information infrastructure with intelligent routing and translation of data, creating a seamless enterprise architecture for disparate applications. DataGate also gives traders and other users access to virtually any system, thus preserving a company's investment in legacy hardware and software.

By linking different software and networking applications, and making all the translations, DataGate aims to provide complete integration across diverse platforms and geographies.

The New York Hilton is located at 1335 Avenue of the Americas, New York, N.Y. Telephone the SIA for more conference information at (212) 618-0577.

The AutEx Group is a Boston-based solutions developer for the automation of pre-trade processing and execution information for the global securities market. Its products are targeted toward buy-side and sell-side traders. Among the AutEx suite of products are:

* AutEX+, a global standard for electronic communication of pre-trade indications of interest and block-trading information for listed, Nasdaq and over-the-counter securities, American Depository Receipts and ordinary and convertible securities.

* AutEX+Web, a secure, Internet-delivered version of its equity trade-information service. AutEx+Web provides institutional users not on the front line of trading an additional liquidity tool without any investment in hardware or software.

* TradeRoute, a private, dedicated network that connects investment managers directly to more than 32 broker dealers and alternative sources of liquidity. Using a personal computer, investment managers access TradeRoute from TradeRoute+, vendor order-management systems and in-house management systems.

* MatchPoint, which allows AutEx+ users to directly access State Street Brokerage's Lattice trading system through their TradeRoute+ order-entry screens. The system allows orders to be electronically routed via TradeRoute's dedicated network to State Street's Lattice Match system, providing access to Lattice's internal book.

* BlockDATA/BlockONLINE, a global trade-information source for institutional-trade information, the reporting service of the AutEx+ network. BlockDATA, and its online service BlockONLINE, generates customized reports on trade activity as advertised over AutEx, focusing on specific securities, brokerage firms and industries.

Instinet Corporation, a subsidiary of London's Reuters Group PLC, provides agency brokerage services in global equities to securities professionals in more than 30 countries, delivered primarily through sophisticated computer technology.

Instinet provides its equity transactions and research services to a global base of institutional fund managers and plan sponsors, other broker dealers and exchange specialists. Founded in 1969, Instinet was acquired by Reuters in 1987, and now has offices in eight key financial centers worldwide.

Instinet is registered with the Securities and Exchange Commission as a broker dealer and is a member of the National Association of Securities Dealers, all U.S. regional exchanges, the American Stock Exchange, the Chicago Board Options Exchange, the European Options Exchange and stock exchanges in Frankfurt, Hong Kong, London, Paris, Stockholm, Toronto and Zurich.

As an agency broker, Instinet said it remains neutral in its transactions, neither buying nor selling for its own account. Its only business is providing brokerage services for the benefit of its customers through its application of computer and communications technology.

For Instinet's customers, the primary benefit of using Instinet as their broker is the ability to reduce trading or transaction costs, and in doing so, improve investment performance.

The Nasdaq Stock Market hardly needs an introduction. But its large capital investment in new technology is worth noting.

Employing elaborate computer and telecommunications networks, Nasdaq facilitates the trading and surveillance of more than 5,000 securities. Brokerage firms across the U.S. are able to compete freely via a floorless, screen-based trading environment to execute transactions quickly and efficiently.

Over the last 25 years, the world's first electronic stock market has propelled the securities industry into the 21st century, with its innovative market structure. The average daily share volume on Nasdaq has soared higher than any other stock market in the world. Now, more than half of all equity shares traded in the U.S. every day are traded on Nasdaq.

Nasdaq's web site (www.nasdaq.com), provides market participants a valuable world of trading data, trading services and Nasdaq news.

Richie Fink got his start in asset management as a Yonkers schoolboy almost 40 years ago.

In elementary school, Fink's father set up an imaginary mutual fund to teach the third grader about the stock market. Fink loved following his stocks, and even wrote about his new hobby in a school essay.

In sixth grade, Fink's father let him buy five shares of stock, to teach the prodigy how to research a company. He bought Xerox, and would sneak out of his classroom to a pay phone to call his father's broker for daily updates. "I finally sold the stock after it tripled in value," Fink said "After that, I was hooked."

Today, Fink is still managing assets, although on a larger scale. He is the head of trading at U.S. Steel & Carnegie Pension Fund in New York, the registered investment advisor for U.S. Steel Corp.

The investment advisor manages the pension accounts for U.S. Steel Corp. and its smaller subsidiaries. Ten analysts handle more than $11.5 billion in assets. Of those assets, roughly $6.8 billion is invested in equities, $3.8 billion in bonds and $900 million in a short-term cash portfolio.

Executing the bond and equity transactions for the analysts, Fink estimates he makes 100 trades each week, and works regularly with 50 brokers during the year.

Aside from trading for the U.S. Steel analysts, Fink manages the $900 million cash portfolio. He handles the account with the same schoolboy enthusiasm that first blossomed in the sixth grade. Over the last six years, he has doubled the short-term return rate of the cash portfolio with option buy-writes.

"Buy-writes give me the opportunity to participate directly in our performance," he said. "I know I'm personally responsible for a small percentage of our growth."

An option is a right to buy or sell a security at a prespecified price in exchange for an agreed-upon premium. An option has an expiration

date usually three, six or nine months and if the right is not exercised by that date, the option buyer forfeits the premium.

A call option, for example, gives a buyer the right to purchase a set amount of shares of a security at a fixed price before a prespecified date. For this right, the call-option buyer pays the seller that is, the writer a premium. If the buyer does not exercise the option before the expiration date, the premium is forfeited to the seller. A buyer speculates that the price of the underlying shares will rise before the expiration date. So, for a premium, the buyer can buy the shares at the lower exercise price and sell at the higher market price.

A buy-write, on the other hand, is on the seller's side of a call option. Fink will buy a stock and simultaneously sell an option against the stock, hoping the stock price doesn't fall significantly before the option expires. By selling an option against the stock, Fink in effect lowers the price of the stock purchase by the price of the premium. As long as the stock does not drop more than the premium before the expiration date, Fink will profit. And if the option is not called because the stock rises, he will pocket the premium.

"If I can make money on eight out of ten buy-writes, I can beat the average money-market return," Fink added. "Buy-writes allow me to put my own two cents into our growth. They keep me on my toes."

Fink has been contributing to the growth at U.S. Steel since 1970, his first year out of college. He started in the asset manager's treasury department before moving over to the trading desk in 1974.

"When I started, I felt like I was the young guy, trading with my father," Fink said. "Now I've come full circle. I feel like I'm dealing with my sons."

Fink and his wife Dr. Jeri Fink, a psychotherapist and published author have two sons, David and Russell. The couple live in Bellmore, N.Y., the Long Island town made famous by tabloid queen Amy Fisher.

Russell, Fink's younger son, is a film and television student at New York University. David a 1997 graduate of Georgetown University prices securities in the equity department at Bankers Trust in New York.

David recently set up a brokerage account with his father, and the two buy and sell securities together. They talk on the telephone every night about stocks, the market and their investments.

"It's a great hobby for the two of us," Fink said. "David is a late bloomer in the business, but his passion is as strong as mine was when I first got hooked. We're having a lot of fun together."