mkxt, It's over baby!!

Discussion in 'Order Execution' started by murphy, Sep 24, 2002.

  1. murphy


    The Securities and Exchange Commission has terminated MarketXT's status as an electronic communications network after the ECN ran into financial troubles, partly linked to its innovative trading strategy on Nasdaq's auto-execution system, SuperSoes. "The division of market regulation hereby withdraws its no-action letter to you dated Jan. 4, 2000, as extended by letter dated March 29, 2002, concerning MarketXT's status as an ECN," the SEC said in an Aug. 8 letter to Katuria Smith, general counsel for MarketXT. The SEC made the letter public recently.

    MarketXT ceased operating on July 30 amid industry talk that the ECN had run into financial difficulties. MarketXT had switched clearing firms from SWS Securities to Penson Financial Services in mid-July. At the time, industry sources said the ECN owed about $2 million to SWS Securities and was not able to meet its net capital requirements. On March 29, the SEC had confirmed in a no-action letter to MarketXT's counsel Orrick, Herrington & Sutcliffe, that "MarketXT is an electronic communications network as defined in the amendments to the quote rule and the limit-order display rule." The SEC's ECN approval for MarketXT, however, was temporary. "The division...will consider extending, modifying, or revoking its temporary no-action position before Jan. 6, 2003, based on its continuing experience with MarketXT's compliance with the terms of this no-action letter and the operation of the ECN display alternative," Robert Colby, SEC deputy director for market regulation, also wrote at the time. MarketXT executives were not available for comment. The ECN's Web site no longer displays any trading information and only mentions "migrating to a new server system." In December 2001, MarketXT became the first ECN to join Nasdaq's SuperSoes, where it met with success, quickly becoming SuperSoes' top liquidity provider, with as much as 50 percent more volume than number-two Knight Securities. In SuperSoes' auto-execution environment, market-makers could not avoid trading against the ECN, which would, in turn, charge them execution fees. But many market-maker firms declined to pay the fees because they were not members of MarketXT and had no way of avoiding trading against the ECN. MarketXT also promised large liquidity rebates to its members, such as Momentum Securities, its sister online broker in the Tradescape Corp. group. The ECN ran into problems when it found itself having difficulties collecting the execution fees needed to pay the liquidity rebates. E-Trade bought Tradescape in mid-June in a deal that did not include the ECN. MarketXT's volume, which came in large part from Momentum Securities, declined sharply following the merger. Japan's Softbank was a major investor in both E-Trade and Tradescape and essentially withdrew from the two online brokers when they merged. MarketXT CEO Omar Amanat became head of professional trading at E-Trade Financial following the merger, but left after a few weeks to focus on the ECN's future, according to industry sources. They said Amanat was looking for new financial partners to help develop the ECN, powered by its new state-of-the-art platform, LightSpeed. However, given the difficult business environment, such efforts failed, they added. The Track ECN has followed in MarketXT's footsteps, joining SuperSoes in mid-April and vaulting to the top liquidity provider spot in late August. Track said it has worked hard to avoid the problems encountered by MarketXT on SuperSoes and will join Nasdaq's next-generation platform, SuperMontage, next month, which will put the issue to rest. On SuperMontage, market participants have a choice of priority-price/time, price/time with fees, and price/size.

    There is one typo in there, Omar was let go by Etrade without a choice.

  2. maybe IB wants to buy a cheap ECN ??????