Table Of ContentCALL 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
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eBookISBN: 0-306-47976-1
Print ISBN: 0-7923-7423-1
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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.
