IRVINE, Calif. May 10, 2000 (PRIMEZONE) -- (www.IBChannel.com) - The SEC Wants Better Compliance on Limit Orders ... and Quickly. Last week, the SEC held a roundtable discussion that, for the first time, assembled a broad swath of the industry to consider limit order transparency. SEC Chairman Arthur Levitt used the occasion to telegraph that he expects a voluntary solution from the industry, and will lose patience if that doesn't happen.
While major exchanges are slow to reform; two companies on the cutting edge of trading technology and reform are Knight/Trimark (Nasdaq:NITE), 20% owner of Easdaq, and WAMEX Holdings, Inc. (OTCBB:WAMX) - the only publicly traded company known to be developing a global "round the clock" Alternative Trading System which may be more powerful than any exchange or trading system now in operation. For a sneak preview visit www.wamx.com.
Never before has a securities firm opened its limit order book to its clients. WAMEX not only does this, but also displays its orders to the entire world. WAMEX has officially declared July 4, 2000 "Investor Independance Day", the launch of its new electronic Alternative Trading System, enabling individual investors and institutions to trade directly on a global platform. WAMEX reduces Spread Exposure by eliminating the intervention of brokers and or traders. This revolutionary trading platform provides investors round the clock access to trade all registered securities at low cost with anonymity across all continents, in any major currency, in nine different languages, and smart order routing to trade on all major exchanges.
The WAMEX trading system is bound to become the major alternative to trading securities on traditional markets and exchanges. WAMEX has affiliated with companies such as Oracle (Nasdaq:ORCL), NYD2, 1 Web Pl., Netholdings and IBChannel.com to create a new Alternative Stock Market. Russell Chimenti, NYD2 Chief Administrative Officer, recently stated, "NYD2's clientele includes, but is not limited to, American Express, Foster Wheeler, Lucent, McDonalds, ARAMACK, the Associated Press, Johnson and Johnson, and Warner Lambert. NYD2's creativity and technological prowess coupled with the WAMEX ATS software platform and Oracle's engineering, will provide an unmatched trading experience and certainly, when deployed, provide shareholders with long term value."
Additionally, IBC's broad network of affiliations with public companies will enable WAMEX to quickly facilitate trading in popular growth stocks. IBChannel.com is the premier business and finance portal providing investors with a one stop destination for business and financial information. Interactive Business Channel Inc. develops and invests in new technology companies and new technology incubators. The strategy is to integrate companies into a collaborative network that leverages its knowledge and resources. Its network of relationships include WAMEX Holdings, Inc., VoIP Telecom Inc., Infe.com, Intermost, Medcom USA, Usurf America, and Xpedian Inc. IBC may have equity positions in the companies mentioned herein please visit www.ibchannel.com/disclaimer.
Knight Securities, a subsidiary of Knight/Trimark Group, Inc. (Nasdaq:NITE), has recently launched a pilot program in which executions of certain Nasdaq orders automatically occur at the midpoint between the national best bid/offer (NBBO).
Under the pilot program, incoming market and marketable limit orders will execute automatically against any resting opposite-sided market and marketable limit orders at the midpoint of the then existing NBBO. Knight will conduct the pilot program over the next 60 days and, concurrently, will roll out this new service to all of its clients in all Nasdaq securities throughout this period.
"Knight's investment in technology continues to yield dividends as we now have the programming ability to deliver this valuable service to the OTC marketplace," said Michael T. Dorsey, Senior Vice President, General Counsel, and Secretary of Knight/Trimark Group. "Investors will benefit from this new service as it will provide more opportunities for price improvement plus more immediacy on their Nasdaq orders.
More on SEC Reform
If the reform comes to pass -- and the Securities and Exchange Commission is now warning it wants action -- it could break down one of the biggest barriers separating small investors and the financial industry's most powerful players. Limit orders, which have become a favorite tool of individual investors, are instructions to buy and sell at specific prices. Today, they've become the dominant form of trading on both the Nasdaq Composite Index and the New York Stock Exchange.
Simply "knowing that a thousand shares are available at a certain price doesn't tell us much about where the (overall) market is," said Robert Pozen, president of Fidelity Management and Research. So while market prices expose the top slice of the market, limit order transparency would make the full panoply available far and wide.
"It's one more step toward leveling the playing field," said Stephen C. Richards, senior vice president of the E*Trade Group, an online trading firm popular with individual investors.
As repositories for customer orders, Wall Street's big players have long had access to that information. But today, they pretty much keep it to themselves. The biggest plus in giving it up would be the information advantage it conveys to smaller investors. But it also would tend to curb any trading abuses by firms. Rules are already in place to bar such trading, but enforcement activities show it sometimes takes place.
"If I could have it all, I'd like full exposure, as long as our limit orders are protected," said Peter Jenkins, managing director of Scudder Kemper. "Anything you expose to the book should have some kind of priority."
There's also worry that any new system would create new opportunity for mischief. Daytraders might flock to the information like moths to a porch light, some say, and momentum investors could likewise be drawn in. That could complicate liquidity and volatility, they warn.
"It's naive to think you won't have potential abuses of this extra transparency," said Madoff. But "it's not a reason not to do it."
Already, some progress has been made. The NYSE is laying plans to open up its order books by the end of the year. Island ECN, a computerized trading system that allows display and matching of buy and sell orders for retail and institutional investors, already makes its order books available on the World Wide Web. Other players also do this, or plan to.
But a solution that reaches across all markets, all the time, remains the Holy Grail. Why would the industry be willing to give up what has been among its crown jewels.
Basically, there are new realities of the marketplace, said Richard Ketchum, president of the National Association of Securities Dealers -- the speed of today's trading, the narrowing of price increments and investors demanding more control over their holdings.
Put another way, at least some of the balance of power has shifted -- not through government fiat but instead through the same "competitive market forces" that Wall Street likes to tout as the beacon of capitalism. Only this time, it's big players like the NYSE and Nasdaq that are under the gun, as trading begins to migrate elsewhere.
"Like it or not, it's time to sit here and talk about transparency," said Michael W. Clark, managing director of CS First Boston.
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