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Level The Playing Field

The Boston Stock Exchange last week kicked off an electronic-trading venture aimed at increasing competition and choice in the securities trading market. Citigroup, Credit Suisse First Boston, Fidelity Brokerage, and Lehman Brothers have taken equity stakes in the Boston Equities Exchange, which will be phased in over a 12- to 15-month period. In a similar move the week before, the Philadelphia Stock Exchange sold equity stakes to Citigroup, Credit Suisse First Boston, Morgan Stanley, and UBS.

The steps by the regional exchanges are intended to bolster their market shares vis-a-vis the dominant New York Stock Exchange and Nasdaq. The NYSE is merging with Archipelago Holdings Inc., whose ArcaEx E-trading platform in July processed 3.5% of trades in NYSE-listed securities and 25% of trades in Nasdaq-listed securities. Nasdaq has agreed to acquire Instinet Group Inc., whose Inet E-trading platform processed 25% of Nasdaq-listed securities in July. The money-losing Boston Stock Exchange and the also-in-the-red Philadelphia Stock Exchange each handle less than 1% of the shares traded in NYSE-listed companies.

With their move into the E-trading space, the regional exchanges are trying to take advantage of the Securities and Exchange Commission's new rules for a national market system that could let them attract orders away from their megacompetitors. Reg NMS, as it's known, requires that electronic stock trades be executed at the best price available, regardless of the market.

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