Call Auction Trading: New Answers to Old Questions PDF
Preview Call Auction Trading: New Answers to Old Questions
CALL AUCTION TRADING New Answers to Old Questions CALL AUCTION TRADING New Answers to Old Questions edited by Robert A. Schwartz Zicklin School of Business, Baruch College, CUNY John Aidan Byrne Traders Magazine Antoinette Colaninno Zicklin School of Business, Baruch College, CUNY KLUWER ACADEMIC PUBLISHERS NEW YORK,BOSTON, DORDRECHT, LONDON, MOSCOW eBookISBN: 0-306-47976-1 Print ISBN: 0-7923-7423-1 ©2002 Kluwer Academic Publishers NewYork, Boston, Dordrecht, London, Moscow Print ©2003 Kluwer Academic Publishers Dordrecht All rights reserved No part of this eBook maybe reproducedor transmitted inanyform or byanymeans,electronic, mechanical, recording, or otherwise, without written consent from the Publisher Created in the United States of America Visit Kluwer Online at: http://kluweronline.com and Kluwer's eBookstore at: http://ebooks.kluweronline.com Contents List of Participants vii Conference Sponsors xi Preface xiii Introductory Remarks xv Chapter 1: The Call Auction Alternative 1 Chapter 2: The Broad Perspective 15 Chapter 3: View From a Market Maker 39 Chapter 4: Alternative Call Auction Designs 49 Chapter 5: Darwinism vs. Protectionism In the US Equity Markets 69 Chapter 6: View from a Derivatives Exchange 77 Chapter 7: Integrating Call and Continuous Trading 87 Chapter 8: ACall Auction’s Role intheMarketplace 107 Afterword 129 vi Call Auction Trading: New Answers to Old Questions Participant Biographies 133 Index 151 List of Participants Douglas Atkin* Partner Efficient Frontiers *At the time of the conference, Douglas Atkin was President & CEO of Instinet Corporation. Kim Bang President Bloomberg Tradebook Harold S. Bradley Senior Vice President American Century Investment Management William Brodsky Chairman & CEO Chicago Board Options Exchange William G. Christie Dean The Owen Graduate School of Management, Vanderbilt University Kalman J. Cohen Distinguished Bank Fuqua School of Business, Duke Research Professor Emeritus University Paul Davis Senior Managing Director TIAA-CREF Investment Management, LLC J. D. Delafield CEO Delafield Hambrecht, Inc. Marianne Demarchi* Director of Strategic Euronext Marketing *At the time of the conference, Marianne Demarchi was with the ParisBourse. In September 2000, the Paris, Brussels and Amsterdam stock exchanges merged to create Euronext. Ian Domowitz* Managing Director ITG Inc. *At the time of the conference, Ian Domowitz was Smeal Professor of Finance at Pennsylvania State University. Michael A. Dritz Chairman Dritz Enterprises, LLC William Freund Director, William C. Freund Lubin School of Business, Pace Center for the Study of University Equity Markets Allan Grody* President Financial InterGroup Holdings viii Call Auction Trading: New Answers to Old Questions *Allan Grody is also Adjunct Professor at New York University’s Stern School of Business. William Harts* Executive Vice President, The Nasdaq Stock Market, Inc. CorporateStrategy *At the time of the conference, William Harts was Managing Director at Salomon Smith Barney. Andrew Howieson* *A At the time of the conference, Andrew Howieson was an official of Bond Connect, a fixed income system operated by State Street. PeterJenkins* Managing Director Deutsche Bank *At the time of the conference, Peter Jenkins was with Scuddcr Investments. On April 8, 2002 Scudder was acquired by Deutsche Bank. Raymond Killian Jr. Chairman Investment Technology Group, Inc. Jan Kregel High Level Expert United Nations Conference on Trade and Development David Krell President & CEO International Securities Exchange William Lupien Chairman OptiMark, Inc. Kai-Oliver Maurer Head of Product Deutsche Börse Management Traders Russell Monahan Director of Strategic American Stock Exchange Research Duncan Niederauer Managing Director Goldman Sachs, Inc. Kenneth Pasternak* Partner Chestnut Ridge Capital *At the time of the conference, Kenneth Pasternak was President & CEO of Knight Trading Group. Junius Peake Monfort Distinguished Monfort College of Business, Professor of Finance University of Northern Colorado GeraldPutnam CEO Archipelago, Inc. James Ross Senior Vice President, Instinet Corporation Global Strategic Business and Sales Robert A. Schwartz Speiser Professor of Finance Zicklin School of Business, and University Distinguished Baruch College Professor Glen Shipway CEO Primex Trading Cameron Smith General Counsel Island ECN George Sofianos* Vice President Goldman Sachs, Inc. *At the time of the conference, George Sofianos was Vice President, International and Research at the New York Stock Exchange. Holly Stark Principal and Director of Kern Capital Management Trading Benn Steil André Meyer Senior Fellow Council on Foreign Relations List of Participants ix in International Economics Richard Tipaldi Managing Director Salomon Smith Barney Daniel Weaver Associate Professor of Baruch College,Zicklin School of Finance Business Bruce Weber Director, Subotnick Baruch College, Zicklin School of Financial Services Center Business Robert Wood Distinguished Professor of The University of Memphis Finance Susan Woodward* Chairman Sand Hill Econometrics *At the time of the conference, Susan Woodward was on the senior management team at OffRoad Capital. R. Steven Wunsch President & CEO AZX, Inc. Conference Sponsors Archipelago, Inc. Bloomberg Tradebook Chicago Board Options Exchange Herzog, Heine, Geduld, Inc. InstinetCorporation Investment Technology Group, Inc. Jefferies & Co. Knight/Trimark Group, Inc. The Nasdaq Stock Market, Inc. New York Stock Exchange OptiMark Technologies, Inc. Security Traders Association State Street Corporation WR Hambrecht + Company Preface This book is based on the proceedings of The Electronic Call Auction: New Answers to Old Questions, a conference hosted by the Zicklin School of Business on May 16, 2000. The text includes the edited transcripts of the panel discussions and separate addresses by three major industry executives Douglas M. Atkin, formerly President and CEO, Instinet Corporation; Kenneth D. Pasternak, formerly President and CEO, Knight/Trimark Group, Inc., and William J. Brodsky, Chairman and CEO, Chicago Board Options Exchange. The electronic call auction is an important trading vehicle in many market centers around the world, but is not well understood in the US. What are call auctions? How should they be designed and integrated with continuous trading in a hybrid market structure? As call auctions play a more central role in the US markets, how will they affect market quality in terms of transparency, order flow consolidation, and price discovery? These and other critical questions were asked at the conference while the efficiency of the US markets was broadly assessed. This book, however, is not simply intended to be a historical record of the conference. We have edited the manuscript to make it more readable, understandable, and complete. Throughout, we have introduced new material obtained in follow-up interviews with many of the panelists. Our intention has been to flesh out the discussions and to keep the material as contemporary as possible without sacrificing the essential nature of the original debate. In addition, we have included an introductory chapter that has a simple description of a generic call auction. That chapter also discusses, in broad terms, the role a call auction could play in US equity markets.
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