|DECEMBER 9, 1999|
|International Securities Exchange Announces Primary & Competitive Market Makers|
|NEW YORK, December 9, 1999 - The International Securities Exchange (ISE) announced today seven Primary Market Maker (PMM) members: Arbitrade Holdings; The Arbitrage Group; Bear Specialist Inc./Hunter Specialists, LLC; Deutsche Bank Securities, Inc.; Goldman Sachs & Co. and The Hull Group; Knight/Trimark Group, Inc.; and Morgan Stanley Dean Witter & Co.
As Primary Market Makers, these firms will provide liquidity in their assigned options by making continuous two-sided markets and ensuring that orderly market conditions are maintained in the first fully electronic options market in the United States.
Patrick Whalen, managing director and head of equity sales of Morgan Stanley Dean Witter & Co., said, "We are dedicated to creating a more equitable and efficient market structure for options trading. The ISE will provide an environment that is potentially capable of achieving these goals. We look forward to working with the ISE in the further development of their market."
The combined trading experience and order flow capabilities of this group of leading institutions will contribute significantly to the launch and growth of the ISE. These firms have successfully traded equities and/or options, "upstairs" and on trading floors and electronic systems worldwide.
David Krell, president and CEO of ISE, said, "These firms provide the balance of experience that we have sought. They provide the market making expertise and significant capital commitment that a successful options market requires. The options industry is growing in size and sophistication; we could not have asked for a better team with which to move forward."
ISE Announces Market Makers - 2In addition to these seven PMMs, Adirondack Trading Partners (ATP) will operate two PMM memberships. "ATP is considering the formation of a joint venture with an established options market making entity," said Marty Averbuch, president of ATP, "and this will enable us to contribute liquidity early on."
ATP is the consortium of broker/dealers that is funding the ISE, providing the capital necessary to develop the trading and regulatory systems, acquire hardware, and accomplish all other endeavors associated with establishing the Exchange.
Scott Prince, managing director of Goldman Sachs, said, "It is clear that electronic platforms create market efficiencies and cost savings that directly benefit our clients. An electronic exchange such as the ISE will provide a competitive alternative for our clients and enable our Hull Group affiliate to more effectively provide liquidity to the options marketplace."
Including ATP, these firms will also trade as Competitive Market Makers (CMMs) in 59 of the 100 available memberships. In their roles as Competitive Market Makers, these and other firms will provide additional depth and liquidity. Each CMM will quote independently, thereby ensuring a competitive quoting process that will provide narrow spreads with quotes in size.
ATP has been accepting indications of interest from financial institutions and is in the process of negotiating the sale and/or lease of the remaining 1 PMM and 41 CMM memberships. Mr. Averbuch said, "There is very significant interest from international firms, already experienced in electronic trading, and domestic firms involved with the current floor-based exchanges."
Ken Pasternak, president and CEO of Knight/Trimark Group, said, "The combination of the ISE's fully electronic options trading platform, a first in the U.S., and Knight's proven business model will provide investors with cheaper and faster execution on all of their options transactions. Knight and the ISE, by setting options execution standards on par with those found in the equities market, will benefit institutional investors and attract self-directed retail investors to utilize options as part of their individual portfolios. Knight believes that the application of best execution standards will be the cornerstone of the options market's evolution and growth in the U.S. and abroad."
Peter Hajas, CEO of Arbitrade Holdings, said, "As an established options market maker, Arbitrade understands that a growing need exists for a fully electronic U.S. options trading platform. We believe that our advanced trading technology, which dovetails nicely with that of the ISE, will be a significant addition to the new options exchange. We look forward to working with the ISE and its partners to create a venue in which all investors will win."
ISE Announces Market Makers - 3Ralph Reynolds, managing director, equity derivatives trading of Deutsche Bank, said, "We are excited to be a part of the first completely electronic derivatives exchange in the United States. This is a continuation of Deutsche Bank's electronic business strategy, which is being implemented across the globe. The new environment for exchange traded derivatives should expand the universe of options users and facilitate liquidity in the overall marketplace."
Gary Katz, senior vice president of marketing and business development of ISE, said, "The three major deliveries necessary to meet our targeted launch date of March 24, 2000 are on track to completion: regulatory approval, technical systems and memberships. We anticipate SEC approval of our exchange application, the trading system has been accepted by ISE and is currently undergoing stress testing, and this announcement of members is a major step toward the development of deep, liquid markets at the ISE."
Members' BackgroundMorgan Stanley Dean Witter: Morgan Stanley Dean Witter & Co. is a global financial services firm and a market leader in securities, asset management and credit services. The company has offices in New York, London, Tokyo, Hong Kong and other principal financial centers around the world and has 464 securities branch offices throughout the United States.
Knight/Trimark Group: Knight/Trimark Group, the parent company of Knight Securities and Trimark Securities, is the largest wholesale market maker in U.S. equity securities. Knight Securities makes markets in over 7,500 equity securities listed on Nasdaq and the OTC Bulletin Board. Trimark Securities trades NYSE-listed and AMEX-listed equity securities over the counter - the Third Market. Knight/Trimark Group employs more than 600 people worldwide with offices in Jersey City, NJ; Jericho and Purchase, NY; Chicago, IL; Boston, MA; and London, England. The firm has been selected to the "Fortune e-50 " stock index.
Goldman Sachs & The Hull Group: Goldman Sachs is a leading global investment banking and securities firm, providing a full range of investing, advisory, and financing services worldwide to a substantial and diversified client base, which includes corporations, financial institutions, governments and high net worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world. The Hull Group is a leading global market maker in exchange-traded equity derivatives and an active market maker in equity securities worldwide.
Deutsche Bank: With over $869 billion in assets as of September 30, 1999 and approximately 90,000 employees, Deutsche Bank offers its clients unparalleled financial services throughout the world. It ranks among the leaders in asset management, capital markets, corporate finance, custody, cash management and private banking. Deutsche Bank is divided into five major business units: Global Corporates and Institutions, Global Technology and Services, Asset Management, Corporates and Real Estates, and Private and Retail Banking.
ISE Announces Market Makers - 4Bear Specialist Inc./Hunter Specialists, LLC: Founded in 1975, Bear Specialist Inc./Hunter Specialist, LLC (Bear/Hunter) unites the financial resources of Bear, Stearns & Co. Inc., one of Wall Street's leading investment banks, with the market knowledge, advanced technology and trading expertise of Hunter Specialists, LLC. Bear/Hunter is one of the largest specialists units on each of the NYSE and AMEX , in terms of number of specialists, volume of transactions and capital resources. Bear/Hunter is also one of only two specialist units to operate among the top ten specialist units on both the NYSE and AMEX, and functions as market makers for over 180 securities on the NYSE and over 150 securities and derivatives on the AMEX. Bear/Hunter has positioned itself to be a principal market maker at the point of price discovery and believes its ability to use capital to create fair and liquid markets is essential in all of its exchange activities. Through its joint account and separately, Bear Stearns & Co., Inc. and Hunter Specialists LLC will operate the memberships.
The Arbitrage Group: The Arbitrage Group, LP founded in 1992 by Bernard L. Rice, has developed a leading position within the exchange-traded individual equity options market by implementing a combination of state-of-the-art technology and communications systems. The Arbitrage Group utilizes a proprietary system, integrating communications and risk management functions, to analyze real-time data feeds, thereby automating the decision-making process.
Arbitrade Holdings LLC: Arbitrade Holdings is a high-tech combination of trading firm and research lab, integrating state-of-the-art technology, sophisticated financial trading practices and a team of talented individuals to forge a major presence in select areas of the financial marketplace, including proprietary trading and investment management. The firm employs approximately 190 people worldwide with offices in Minnetonka, MN; Chicago, IL; White Plains and New York, NY; Santa Clara, CA; and London, England.
ISE Market Structure/Membership InformationThe ISE plans to list and trade 600 stock options, which will be divided into ten groups of approximately 60 stock options each. Market makers will be assigned to provide liquidity in each group.
There are three types of ISE members:Primary Market Maker ("PMM") - PMMs, similar to specialists (DPMs or LMMs on other exchanges), are market makers with significant responsibilities, including overseeing the opening, providing continuous quotations in all of their assigned options classes, and ensuring that customer orders are not automatically executed at prices inferior to those available at other options exchanges. One PMM will be assigned to each of the ten groups of options traded on the Exchange.
ISE Announces Market Makers - 5Competitive Market Maker ("CMM") - CMMs are market makers that add depth and liquidity to the market and are required to provide continuous quotations in at least 60% of the options classes in their assigned group. Each CMM quotes independently. Up to ten CMMs will be appointed to each of the ten groups of stock options traded on the Exchange.
Electronic Access Member ("EAM") - EAMs are broker/dealers that represent agency and proprietary orders on the Exchange. An EAM does not purchase a membership. Rather, once approved as an ISE member, an EAM pays an access fee that permits the firm to place orders in all of the options traded on the Exchange.
ISE BackgroundISE will become the first fully electronic options exchange in the United States and the world's first options marketplace combining electronic trading and auction market principles.
On February 2, ISE filed its application for registration as a national securities exchange with the Securities and Exchange Commission (SEC). Upon approval by the SEC, ISE will become the first new registered U.S. securities exchange in 26 years. ISE plans to list options on 600 of the most widely owned and popular stocks.
ISE headquarters is located at 60 Broad Street, New York, NY 10004 and can be reached at (212) 943-2400 or, for additional information, visit its web site at www.iseoptions.com.