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To: Gary Korn who wrote (3893)	9/11/1999 9:36:00 PM
From: Gary Korn	Respond to of 10027

Here is a post from the YHOO board that says something akin to what I just mentioned about ECN/MM connectivity in the OLB supermarket: messages.yahoo.com Comments on fortune article by: magikev (41/M/CA) 82653 of 82661 Finally read the Fortune article. It doesn't make the point that begs to be made: the technolgies behind NITE and behind ECNs are an awful lot alike. I can't imagine it would take long to convert their computerized trading software to function like that of an ECN. I suspect NITE has some unannounced tricks up their sleeve. I still think the "buyout" angle is the one that makes the most sense: buy NITE, use its idle capacity (there's a lot of it) to experiment with ECN-style processes, and have the best of both worlds. For MErril, who has announced an "all-you-can-eat" trading package for online investors, this would be a no-brainer. So give me some feedback on this: you take trades from your own online customers, and automatically route them to the ECN system. If a match occurs in, say 10 seconds...Bingo! Trade is done. If not, trade transfers to the active trader screen, and is executed on the MM system. That eats up some manpower, but you get a piece of the spread in return. This allows you to offer your clients the speed and cont-savings of an ECN where possible, but gives them - and you - the advantages of MM liquidity where needed. And you'd have THE PROVEN BEST MM function in town. Clients could even choose to route their orders to ECN (for savings) or MM (for reliability). This is something that OLBs have hinted at offering in the future. ECN or no ECNs, I think NITE is worth a lot of money to a lot of people. And if there is a buy-out offer, I wouldn't be surprised to see a bidding war break out. If you were Goldman or Morgan-Stanley, how would your life change if you woke up and Merrill suddenly owned NITE? (NOTE: THIS IS NOT A RUMOR OR A NEWS ARTICLE! THIS IS JUST MY OWN THOUGHT.)

To: Gary Korn who wrote (3893)	9/11/1999 11:51:00 PM
From: gbh	Read Replies (2) \| Respond to of 10027

How? What is the business model? The method for making money? How is it superior to NITE's, and why cannot both exist in the same milieu? I tried to explain, in my posts, why the ECN "threat" may not really hold up. What then, are the reasons why NITE's model cannot stand? Gary, why do you have the impression that I am stating NITE has an unsustainable business model? My gosh, if I thought this wouldn't be long the stock. The case for market order routing is a no brainer. PFOF is the winner. NITE is the winner. The case for limit order routing, especially outside the spread, is less obvious. One statistic I would like to see, is the percentage of market vs. limit that the OLBs process. Now that might be a telling sign. If they are starting to see more limit orders, with no other route than NITE, then this could well explain their interest in ECNs. MMs are not going away. But neither are ECNs. On the contrary, its my feeling that the ECNs will have to consolidate much the way the MM industry will have to. NITE will be a leading survivor. So will INCA/ISLD/ARCA and maybe one more. Given how ECN's make money (not on the spread, only on liquidity charges, and in ISLD's case less than 1/4 cent per share), I just want to know how they compete with NITE in attracting order flow and business? (Even assuming full liquidity in all stocks, which is a far, far, far cry from reality) I think I've stated this. Through zero risk limit order flow. Go to Nasdaqtrader.com and compare the volume growth of ISLD vs. NITE. Looks quite similar. The difference is liquidity of lesser trader issues. Maybe the OLBs want a piece of ECNs so that they can put an ECN button on the order entry screen and, when the customer chooses that option, the OLBs at least get something (on the theory that something is better than nothing, even if they may get MORE from execution through NITE). Like a supermarket, you've gotta have all the products on the shelf. There is no button to "choose" at Datek. Unless the customer has educated himself, the order routing at Datek is transparent. I'd bet 90% of Datek customers, could care less about where there limit orders are displayed. I would assume when EGRP and the others set-up there connectivity to ARCA it will also be transparent to Ma and Pa trader, just like Datek. Gary