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Non-Tech : Ashton Technology (ASTN) -- Ignore unavailable to you. Want to Upgrade?

To: mst2000 who wrote (2588)	9/13/1999 9:51:00 AM
From: biffpincus	Respond to of 4443

MST's response to the questions posed by ASTN's relationship with the PHLX, etc., et. al ... the debate continues ... I think ATG looks at the PHLX very differently than your friend does at this point. PHLX is little more than a regulatory platform for Ashton - just by being in the game as a licensed exchange (even if they are playing second base, as your friend puts it - which is a fair statement), the PHLX gives ATG access to markets much faster than would be the case if ATG had no exchange affiliation and was a mere B/D. And PHLX's weakness makes them that much more dependent upon ATG's electronic trading products for future direction. Rittereiser said at the annual meeting that ATG's relationship with PHLX is as a partner right now, and that ATG's trading products will, in the US, operate through PHLX, NextExchange, or an amalgamation of PHLX/NextExchange. He also indicated that with eOX, ATG would attempt to break the current monopoly of the Options Clearing Corporation, which clears all trades for all 4 options exchanges, and may thus go it alone (e.g., through NextExchange) though it seems liklier that they will form an alliance with an existing options exchange and they are located in Philadelphia. One of the key aspects to ATG's trading system at this point is the extent to which they are building clearing and credit facilities directly into the system, for T+1 purposes and otherwise. If PHLX is acquired by NYSE or another exchange, UTTC not only has contractual rights that will protect ATG, but the concurrent licensing of NextExchange (and the clearing capacities it is creating) will also provide an alternate pathway to the continued availability of ATG trading products. But with Reg ATS opening the door to licensing for-profit exchanges and sanctioning the emergence of alternative trading systems as long as they carry with them the regulatory protections of exchange status or affiliation, the current reputation of PHLX has relatively little to do with whether ATG (a fully electronic system accessible with complete security on-line or over telecommunications facilities) will be successful. second point: The notion of the NYSE putting VTS out of business by restricting trading of NYSE listed stocks to NYSE specialists is not a concern to an ATS like VTS, but it may be to the ECNs which are moving now to encroach on NYSE trading volumes. Not only did the SEC approve the use of VTS to trade the top 300 NYSE listed securities on VTS, but Reg ATS itself makes it clear that alternative trading systems may provide alternative pathways to execute upon listed securities. ATG is not buying and selling NYSE stocks in competition with the specialists of the NYSE in the sense that the pricing is at a derivative - the exact VWAP. The parties matching trades on ATG's VTS system are trading directly with one another - REB Securities (a PHLX seatholder and ATG subsidiary) "operates" the system, but there is no intermediary serving as a counterparty in the MM sense - NYSE floor specialists using VTS are not charged for the trade (they are the only ones who do not pay) and they have the legal right to use the system -- other counterparties all pay a fee to UTTC for the privelege of buying or selling a share over the system. Now I would love to see the NYSE try to stop ATG in the way your friend suggests because (i) that would truly be the mother of all civil antitrust suits (UTTC as plaintiff) assuming the SEC doesn't slap it down, as it surely will, and (ii) it will perhaps finally convince everybody that the traditional exchanges are going to be affected by Reg ATS, which will give more respect to the electronic trading sector. Frankly, I think the NYSE is much more concerned about how ECNs will cut into their trading, because the ECNs are basically offering the same type of service as a NYSE specialist does, which is to maintain a limit order book and trade moment by moment within the best available market range, and that the NYSE (and NASDAQ) will strike back on that front in the next year or two with a Super ECN. But I do not think ATG is at risk of the NYSE snuffing them out anytime soon because of the nature of its system and its approved status with the SEC. FWIW - I do agree that ATG is a peripheral player at this point, but that is because they are relatively unknown, and the securities trading industry is undergoing tremendous change right now (as a result of Reg ATS, the emergence of new trading technologies and patterns, and otherwise). Companies or ideas that were peripheral 1-2 years ago will soon be at the center of emerging trends within the industry - it is already happening. And ATG will be at "second base" because of its affiliation with the PHLX. And will get to hit a few times over the course of a nine inning game, if you know what I mean. Let's hope that the traditional players are underestimating ATG when they step to the plate. One final point - the notion that the big names in the industry have not heard of ATG and do not care is false. There are those who care and those who don't. But there a plenty of big names who have looked at ATG(including the NYSE), are now looking at ATG, and will be looking a lotcloser than ever before over the next 6-12 months. Let's see who they get to invest in NextExchange and eMC - I think it will be a pretty interesting indicator of where this is heading.