FLASH FRIDAY: Catching up with a former CEO of Exchange
FLASH FRIDAY is a weekly content series on the past, present and future of trading and technology in the capital markets. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
When last seen on the pages of Traders Magazine, David Colker was managing director of the Cincinnati Stock Exchange, discussing a new plan to offer cash backs in a January 2003 article.
We caught up with David from his home in Evanston, Illinois to learn more about his career and see what’s new in 18 and a half years.
How did you get involved with the Cincinnati Stock Exchange?
The then president of the CSE (Jim Anderson) was a partner in the Cincinnati law firm I practiced with (Taft, Stettinius & Hollister). I had developed a friendship with Jim and, when I decided that practicing law in a large firm was not for me, Jim invited me to work for the CSE, where I started as a lawyer in January 1984.
What was the exchange competitive advantage?
In 1984, the CSE had been in the process of becoming, in recent years, the first fully computerized stock exchange in the country. Eliminating our physical trading floor and replacing it with a fully electronic model created a huge cost advantage for the CSE due to the elimination of the expense associated with a physical trading floor. This innovation has enabled CSE to offer instant and low cost executions at the best national deal or offer.
What was the 2003 debate on liquidity rebates about?
The debate over liquidity discounts has been around forever, and it continues today with Robinhood receiving liquidity discounts from Citadel Securities. Order flow has value, and therefore exchanges and brokers compete against each other by paying order flow providers in one way or another. In 2000, CSE decided to leverage its operating cost savings by offering to share its market data revenues – which only exchanges could earn – with clients who brought their order flow to the exchange. This enabled us in 2003 to capture 35% of all transactions on issues listed on the Nasdaq. We have regulated the activity to ensure that, despite such compensation, the end customer always receives the best possible execution price.
What were the highlights of your time at the CSE?
I am most proud of two things: (1) completing and continuously improving CSE’s transition to the country’s first fully automated stock exchange, which enabled the public client to receive, for the first time, low instant execution. cost at national level best price; and (2) creating the opportunity – thanks to the liquidity discounts mentioned above – for the public client to receive, for the first time, professional quality market data in real time.
How did the exchange go? change of company during your 23 years there?
See above. To put this change in context, when I started working for the CSE in 1984, the NYSE had a monopoly on stock trading, handling 85% of all trading activity in its listed issues. The Nasdaq had only been formed a few years ago, and CQA / CTA and ITS had just started (there was no consolidated national listing or trade information or inter-market trading vehicle to ensure the best price for the market. execution before this date). In addition, in the absence of an automated settlement infrastructure, transaction settlement took five days. Only the NYSE specialist was aware of limit book orders, and the law mandated a minimum bid / ask spread of $ 0.125. Executions on the NYSE were extremely slow, poorly priced, opaque, and extremely expensive. And the NYSE often had to shut down completely if there was activity that would be less than 1% of the normally traded volume today. Imagine a world of paper purchase orders and physical stock certificates that had to be delivered every night. And think about the catastrophic economic disruption we would have experienced in the recent pandemic if this world had still existed.
Which securities houses were the most influential during your CSE days?
The most influential companies in the CSE were the big Wall Street companies that sought to become specialists in NYSE-listed issues and embrace e-commerce. Examples included Paine Webber, Schwab, Fidelity, Pershing, Prudential, and Timberhill.
Why did you leave the CSE?
I chose to quit the Stock Exchange in 2007 because I was physically and mentally exhausted. I’m sure you can imagine the toll taken by competition in the trading world for 23 years.
What have you been doing since 2007?
After taking a few years to regain my health and travel with my wife, I tried to create a concert hall that integrated a concert hall, a recording studio and a stage for his video into one room. I also partnered with an investment banker and a leader in securities technology to try to create a new real estate index that would have replaced Case-Schiller and provided investors with a new and better trading vehicle to invest in. the real estate market. Finally, I have partnered with some major players on Wall Street in an attempt to create a more open, fair and transparent platform for public investors to participate in IPOs.
Do you keep in touch with many people?
I always maintain contact with my staff: CFO, marketing, public relations, systems and executive assistant. More Jim Anderson.
How do you see the forex market today?
I wish I had something smart to say here, but I really haven’t been keeping up with all the changes in this world. However, as I said above, I am proud of my contribution and thankful that foreign exchange trading is so wonderfully efficient now that it can continue to support our financial system during the pandemic.