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UBS's Leibowitz: On the ATS Front Lines
May 14, 2007
Leibowitz joined
UBS as a managing director in November 2004 when it acquired Schwab
Capital Markets, where he served as co-head. Before joining the
Charles Schwab & Co. unit in 2001, he was with Bunker Capital,
a quantitative hedge fund that he co-founded in 1996. Before that
he was CEO of the RediBook electronic communications network (ECN)
until its acquisition by Archipelago, now part of the NYSE.
Leibowitz, a Princeton University graduate, has also been managing
director, head of program and quantitative trading and head of
global equities technology at Credit Suisse First Boston (CSFB);
chief information officer and head trader at Tech Partners, a quant
trading boutique that CSFB acquired in 1991; and head of an
auto-execution-focused trading systems development group at Morgan
Stanley. He spoke last week with SIN correspondent John
Hintze.
Are the Nasdaq and NYSE crosses seeking to recapture
liquidity they have lost to ATSs? I think everyone is
searching to understand what trading and price discovery look like
in an environment that is much more electronic, and they're
experimenting with different models, whether it's an ATS such as an
ECN, a call at a single price and point in time, or a negotiated
cross a la Pipeline [Trading Systems], Liquidnet or Bids. The U.S.
market is in transition right now. The NYSE was a continuous call
market, because you had the floor. You also had block desks doing a
lot of volume before. They've been somewhat disintermediated, and
the world is trying to figure out where to go now.
So it's a period of experimentation? That's correct. Participants are concerned about potentially losing market share, but also clients facing problems in getting liquidity in the market. A lot of that stems from the disappearance of block trades, as more and more clients trade electronically through algorithms and their orders become smaller and smaller. Finding liquidity for the larger blocks has become more and more difficult. The world is experimenting with what is the right way to make that happen again.
Do you see the exchanges' crosses helping on that front? It's really questionable. There's a limit to how much crossing can occur. It requires the simultaneous appearance of a buyer and a seller, and the problem is really being all places at once. The question is, how much more room is there for more discreet, relatively frequent call-market crosses? The exchanges are trying to leverage off of the natural liquidity they already have, and bring people together at the same time. But it's not clear whether they're going to find hugely more liquidity.
