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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: GS_Wall Street who wrote (3613)	8/23/1999 11:14:00 PM
From: Herschel Rubin	Read Replies (1) \| Respond to of 10027

Pasternak was on Nightly Business Report (Part I of a 4-Part Series). This appearance by the CEO probably marks the beginning of the new offensive, including the new ad campaign... They're beginning to strike back! Here's the transcript: Trading Places"- Electronic Communication Networks LINDA O?BRYON: They call them ECNs, electronic communication networks, and they are changing the way stock trades are executed. Some see a revolution at hand, but others say ECNs are just one more step in the continuing evolution of the securities markets. Tonight we begin a four-part series called "trading places," looking at these issues. Scott Gurvey reports from New York. SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: These are the computers of Island ECN, just down the block from the New York Stock Exchange. It doesn?t look revolutionary, but in the second quarter, these computers matched buyers and sellers of six billion shares of NASDAQ stocks. No market maker, no spread, and a very low fee. And Island posts its pending orders on the Internet for all to see so that investors can judge supply and demand, just like the market makers. MATTHEW ANDRESEN, PRESIDENT, ISLAND ECN: What Island offers is a chance to take some of the orders away on the side and match them electronically, and this is what really represents is a chance for retail investors, you know, the average investor, to really compete on a level playing field with everyone. GURVEY: An industry-shaking rule issued in 1997 by the Securities and Exchange Commission made ECNs, electronic communications networks, possible. And the rise of electronic order entry by individual investors and the high-volume trading of hyperactive day traders made it economically feasible. Today, what the SEC calls alternative trading systems do 30 percent to 40 percent of NASDAQ volume. The SEC opened the doors to alternatives in response to complaints that NASDAQ spreads were unjustifiably wide. The market makers were also hit with a class-action lawsuit charging collusion in setting spreads. Now spreads have narrowed so much that many market makers have reduced the number of stocks they handle. Founded in 1969, Instinet is really the granddaddy of the alternative systems. Until the SEC changed the rules, Instinet was available only to institutional clients. It has now partnered with ETrade (NASDAQ:EGRP) and will offer after hours access to retail customers. DOUGLAS AIKEN, PRESIDENT, INSTINET: We?re looking to expand that relationship with ETrade and we?re also in talks with numerous other people in the retail space to figure out ways to do more business and give their clients, the end investor, an Instinet quality execution. GURVEY: While some big-name firms are running away, other market makers are fighting back. This is the Jersey City computer room of Knight/Trimark (NASDAQ:NITE), a three year old firm that by many measures is now the leading NASDAQ market maker. Unlike an ECN, Knight maintains its own inventory of many stocks and can match an order even if no opposing customer order is available. Knight argues that the low transaction costs at an ECN are of no value if the transaction is never made. It believes market makers can provide an added value the ECNs cannot. KENNETH PASTERNAK, PRES. & CEO, KNIGHT/TRIMARK: The customer has been empowered to control the execution process, and he can choose destinations. As he begins to understand more about using ECNs, if he prefers to maintain control and anonymity, that may be appropriate, or choosing market makers or specialists where he desires a guaranteed liquidity environment. GURVEY: How these changes will affect individual investors will depend in part on how the SEC enforces its charge. That markets provide the best possible execution. The question is what does that mean in terms of price, speed and certainty? We?ll look at the enforcement issues tomorrow. Scott Gurvey, "NIGHTLY BUSINESS REPORT," New York.