Just what is Goldman Sachs doing buying Spear Leeds Kellogg for $6.5 billion? Is this not the same Goldman Sachs which just six months ago, together with Merrill Lynch and Morgan Stanley Dean Witter, was sending executives down to Washington to lobby regulators at the SEC and politicians in Congress, to take steps which might do away with such businesses? And didn't Merrill buy a similar operation in June, Herzog Heine Geduld? The object of the big firms' desire was a central limit order book (CLOB) for US equities trading. Without it, ran their argument, equities trading would continue to fragment between electronic order matching via ECNs, and electronic quote-driven market making systems. Fragmentation, they continued, would run counter to a broker's duty to execute at the best price, so a far better platform for clients would be the CLOB.
Indeed were regulators to construct an equities trading environment from scratch today, the CLOB might well be the best model.
But that is not the regulators' job. "We, and others like us, are coming up with market-driven, technology-based solutions to the problem of fragmentation," says the CEO of a technology trading platform.