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

To: Zeev Hed who wrote (859)	5/8/1999 7:15:00 PM
From: mst2000	Respond to of 4443

Exactly, Zeev. And increasing system volume is ultimately the single most important concern to ATG in relation to VTS. But as opposed to viewing those "arbitrage" opportunities as inherently manipulative, which seemed to be the point of your earlier post, perhaps they actually can be viewed as just another neutral way to extract trading ability and thus profit out of an otherwise static intangible ownership interest -- remember, both sides of the arbitrage transaction have the same opportunity to develop predictive structures to help them make better arb trades -- and in the meantime, the underlying price mechanism that gives rise to it provides a valuable service to institutions. By the way, the notion of VWAP as a security has been alluded to by ATG since its earliest SEC filings (in addition to an array of other intra-day VWAP trading products). One thing - I'm not sure I follow the half and half point, Zeev - the choice may not be right or wrong on a 50/50 basis -- it all depends on the prevailing news and timing, and ultimately, even a process driven trader may choose not to use a VWAP order pricing mechanism under certain given market conditions. But if you move away from the more inherently volatile issues to, for example, the 300 most widely traded NYSE listed securities, which generally trade within a fairly narrow range on any given day, the anonymous trade at the VWAP at least offers a chance to achieve a fair execution with no manipulation by MM's, who would otherwise take advantage of the knowledge that some institution is making a large block trade in order to pump up the spread and subtly pump up the price the institution pays, even if it is 1/32. The difference (the savings to the institution over the long haul) per the PHLX study is 8-12 basis points - not a huge number until you extrapolate it to hundreds of millions or billions of shares traded. Then it is huge -- very huge. By my count, if VTS were to trade 20 Million shares per day over 250 trading days at an average price of $50 per share and the theoretical savings were 8 and 12 basis points to either side (I can't remember which off the top), that equates to between $200,000,000 - $300,000,000 per year in savings to each side as compared to normal executions: (20,000,00025050.0008)=200,000,000 (20,000,00025050.0012)=300,000,000 Yeah its all theory, but if you don't think institutions are taking it seriously and looking at it closely, think again. And remember, they already do try to trade using a VWAP standard a decent percentage of the time. MST PS - I don't think you have to be an "ASTN Thumper" to believe that there is a good possibility that such a system will be of importance to institutional traders - they already do it in a far less perfect way, and the SEC approval made it pretty clear (IMHO) that they expected VTS to attract a substantial volume. If you haven't read it, you should (together with Reg ATS) - both reflect just how intense the SEC scrutiny of this particular system was, and what the basic concerns of the SEC were. You might find further intellectual support for some of your own thinking here in those materials, as well as a better appreciation of why some of the ATG longs are long not simply because the price is up 500% from Mid-March, but because they genuinely believe that this one system alone is going to have a significant impact on institutional stocktrading.