Zeev - I completely agree that an appropriate model will not assume 20 Million shares per day at the outset. A back-of-the-napkin analysis I did on (ugh) Yahoo a week or so ago assumed a progressive ramp up to 20 million over a 9 month period. ATG publicly predicts by year end (meaning 12/31? or FY3/31? to 7/1/00? Unclear) that they will be trading 20 Million per day. The good Dr. is correct that 300 issues are what is approved under the Pilot, but that with the liberalization of ATS systems under Reg ATS, ATG should be able to secure SEC approval to expand the pilot (to as much as 2,700 issues) after surveillance of live operations convinces regulators that VTS will not lead to price manipulation. Indeed, given the extent to which price manipulation now permeates the market maker/order flow system that exists, that concern is almost laughable, but the rules are the rules.
ATG will also be introducing 6 or 7 iterations of "intra-day" VWAP shortly after they go live, again in conjunction with the Pilot rules under Reg ATS. That will add to the volumes as well. But to be sure, any model of a development stage company, especially one with an historical record of delays in getting to operational status, should be conservative.
One thing that has been very impressive about ATG's approach to operational status is the ir arrangement for B/D's to provide liquidity to the system by committing to match unmatched "dedicated" trades at the VWAP. One of the major criticisms of Optimark's more publicized ATS has been that the match percentage has been so low (under 20%) leaving institutional users frustrated and less than enthusiastic. Apart from the simplicity of VWAP and its acceptance as a trading standard even in its current synthetic form (i.e., non-anonymous slicing of trades spread over the day), efforts to ensure liquidity from the get go appear very likely to ensure that "going live" in July will have an impact from the start. And as you can appreciate, first impressions are often all you get.
One last note - not only institutions will be eligible to use VTS - any person willing to trade a minimum block of 5,000 shares may do so. I suspect ATG will link its system in some way to that of some or all the major e-brokers to allow public access to VTS. On a 5,000 share trade, the ATG commission would be $150, of which each party would pay $75. To trade 5,000 shares at Schwab's web site, I now pay $119.95. I know there are web-brokers who charge less, but I have been a Schwab customer for years and am too lazy to switch. Would I consider doing a trade at the VWAP. Well, while the average mom and pop won't, given what I have seen of the volatility of trading shares, and the perils of timing them perfectly, I just might want to some day.
I appreciate the dialogue. Thanks!. And thanks for the welcome (to those who were kind enough to make note of it).
MST |
