Abstract
It is with great pleasure I introduce my professional colleague and long-time friend, Frank Hatheway. In doing so, I would like to share a story with you about Frank. As many of you already know, I have been a proponent of call auctions for many years. In my efforts to build support, I had talked to Frank and NASDAQ in the past about introducing a call auction at NASDAQ. I did not meet with a great deal of success. Well, lo and behold, one day I was in my office at Baruch at about 5:30 in the afternoon when my phone rang. “Hello, Bob, it’s Frank,” the voice on the other end said. “We are doing it Bob. We are putting in a call!”
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Notes
- 1.
Instinet was founded by Jerome M. Pustilnik and Herbert R. Behrens and incorporated in 1967 as Institutional Networks Corp. Instinet was set up to compete with the New York Stock Exchange, bypassing specialists through a system of computer links between major institutions. By December 1969, Instinet was activated and became a game changer in buying and selling equity securities in an automated, anonymous, and confidential basis.
The pickup rate remained slow until 1983, when Instinet recruited William A. “Bill” Lupien, a former Pacific Stock Exchange specialist, to run the company. Lupien embarked on a successful campaign to market the system more aggressively to the broker community, rather than focusing exclusively on the buy-side as previously done.
- 2.
The Order Handling Rules were introduced by the Securities and Exchange Commission in 1997. The Limit Order Display and the Quote Rules, enacted as part of the regulation, paved the way for today’s “modern” high-speed electronic markets, starting with the early wave of upstart Electronic Communications Networks or ECNs. See Securities and Exchange Commission, Order Execution Obligation, http://www.sec.gov/rules/final/37619a.txt
- 3.
In 1995, Pasternak cofounded Knight Trading Group in 1995 along with Walter Raquet. Pasternak served as the company’s CEO from 1995 until he retired on January 21, 2002. At the time of writing, Pasternak was the founder and executive chairman of The KABR Group and also managing principal of Chestnut Ridge Capital. Pasternak, chairman of affiliate, KABR Real Estate, was a panelist at this same conference. See chapter Fifteen Years After the Order Handling Rules, How Do the Markets Look Today?
- 4.
Federal legislation launched on June 4, 1975, to amend the Securities Exchange Act of 1934. The 1975 amendments instructed the Securities and Exchange Commission to cooperate with the industry in creating a national market system and laid the groundwork for the clearance and settlement of securities transactions nationwide. The amendments also mandated the prohibition of fixed-commission rates, promulgated earlier by the Securities and Exchange Commission in its Rule 19b-3.
- 5.
US federal legislation of over-the-counter (OTC) derivatives signed into law by President Bill Clinton in December 2000. The law required that most OTC derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (CEA), or as “securities” under the federal securities laws. The major dealers of these products would have their dealings in OTC derivatives continued to be supervised by their federal regulators under general principles of “safety and soundness.” Most importantly, the Act permitted the trading of single stock futures.
- 6.
The Securities Act of 1933, federal legislation on the sale of securities, was enacted following the market crash of 1929. Before this, regulation of securities was mostly overseen by state laws. The Securities Act of 1934 established the Securities and Exchange Commission.
- 7.
Refers to the New York Stock Exchange in lower Manhattan.
- 8.
William (Bill) Donaldson, cofounder of Donaldson, Lufkin & Jenrette, and chairman and CEO of the New York Stock Exchange from 1990 to 1995, was Chairman of the Securities and Exchange Commission from 2003 until 2005.
- 9.
In the USA, “Prohibition” is remembered for the nationwide ban and restrictions on the transportation, import, export, and sale of alcoholic beverages from January 1920 through 1933. The ban aimed to moderate social behavior and curb crime and corruption. However, backroom dealing in the distribution of alcohol flourished along with organized crime.
- 10.
The Depository Trust & Clearing Corporation (DTCC) is the US post-trade financial services company facilitating clearing and settlement services to the financial markets. It also provides central custody of securities. DTCC was established in 1999 as a holding company to combine the Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC) in the automated clearing and settlement of securities.
- 11.
The Jumpstart Our Business Startups (JOBS) Act was signed into law by President Barack Obama in April 5, 2012. It was designed to assist small private business in raising money so that they could expand and hire workers.
- 12.
See RIN 3235-AH41
Regulation of Exchanges and Alternative Trading Systems, https://www.sec.gov/rules/final/34-40760.txt Release No. 34-40760; File No. S7-12-98.
- 13.
Reg NMS (Regulation National Market System) was adopted by the Securities and Exchange Commission in 2005 and introduced 2 years later to further advance the ideals of a national market system. The regulation includes the order protection or trade-through rule; access rule (fair access) to market data including quotations; rules on sub-penny trading and on market data.
- 14.
Daniel Gallagher, Securities and Exchange Commissioner.
- 15.
Refers to Dr. Richard Lindsey, formerly Director of Market Regulation and also Chief Economist at the US Securities and Exchange Commission. Lindsey, who presented the Opening Address at this conference as documented earlier in this book, oversaw the introduction of the Order Handling Rules at the Securities and Exchange Commission in 1997.
- 16.
Facebook’s first day of trading on May 18, 2012, experienced serious technology setbacks that caused a delayed opening, resulting in thousands of orders being blocked for hours in NASDAQ’s system. An estimated $500 million was lost by market-making firms and was a blow to NASDAQ which voluntarily repaid about $41.6 million to these firms. NASDAQ also agreed in April 23, 2015, to pay $26.5 million to settle a class-action lawsuit on behalf of retail investors in this same Facebook IPO.
- 17.
Listing market for early-stage and small companies that do not qualify for listing on national securities exchanges.
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Hatheway, F. (2017). Competition, Incentives, and Innovations in the Great American Marketplace. In: Schwartz, R., Byrne, J., Stempel, E. (eds) Rapidly Changing Securities Markets. Zicklin School of Business Financial Markets Series. Springer, Cham. https://doi.org/10.1007/978-3-319-54588-2_3
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