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To: gbh who wrote (3879)	9/11/1999 11:14:00 AM
From: Gary Korn	Read Replies (1) \| Respond to of 10027

Gary, Good post again. Still trying to work this through in my mind. Assume an E-Trade commission of $20 on a limit order to buy 1,000 shares of INTC: 1. If that order is sent to NITE, and if NITE pays nothing for order flow on a limit order, E-Trade gets only the $20 commission, but it does keep the entire commission amount (i.e., there is no payment made by E-Trade to NITE). 2. If the order is sent to an ECN, then there is an ECN fee of say $2.50 (.0025/share). Unless this fee is passed on to the customer, E-Trade's gross on the trade has just dropped from $20 to $17.50. What would be E-Trade's incentive to do this, to reduce its gross by over 10 percent? Gary Korn

To: gbh who wrote (3879)	9/11/1999 11:32:00 AM
From: Gary Korn	Respond to of 10027

Gary, I see two things out there: 1. Intense price competition for the OLB customer (so this must be a price sensitive business). 2. Margin pressures for the OLB houses (EGRP, AMTD, etc.) With these two pressures, I find it a little difficult to see any mass movement towards ECNs for, from the perspective of the customer and the OLB, these carry with them: 1. An added cost (the liquidity fee) and 2. The loss of payment for order flow (on market orders). True, maybe the customer captures the spread (instead of a market maker), but the customer may care more about fees (and what does the OLB care about the spread, it just wants more money coming in). Gary Korn