. I have recently assigned the on-line brokerage firm A. B. Watley asthe exclusive brokerage house of Cooper Trading. A. B. Watley's Ulti-
Over the  past  couple of years, my  office has  been  inundated  with  requests for
mateTrader™  is  in  my  opinion,  one  of the  best  technology  pieces  available  forshort-term  traders.  The  speed  of  trade  execution  combined  with  extremely  lowtransaction  costs  makes  it a  superior  product.
I have  asked Jonathan  Priddle, a  senior  officer with the firm, to  talk about the latestadvances  in  trading  technology  and  the  UltimateTrader™.  If you  would  like fur-
ther information on the firm's services, you can call them at 1-888-229-2853 or1-212-647-1600, ext. 618. Make sure you tell them you heard about them fromCooper Trading and you will receive special benefits not available to other traders.
jor advances to the way high-end, active retail traders conduct business.
munication protocols are now available to the general public that arecheaper, faster and easily integrated into the active trader's tool kit.These new technologies not only provide real-time, fully configurabledata feed with integrated execution, but also allow for consistently reli-able connection
THE TECHNOLOGY EDGEMassive strides in information and trading technologies are bringing ma-
A new  breed  of technologically innovative  trading  systems  and  telecom-
Newly introduced Proprietary Trading Systems (PTS) are designed to run
Appendix
and execution needs. Through powerful desktop software, traders are
on  the  PC  and  are  specifically  tailored  for  active  traders  and  their  data
able to configure their desktop screen so that they can see price data as it
suits their own needs. With the innovation of integrated point and click
spread and consistently achieve significant cost savings. As executioncosts decrease, so does the overall cost of trading. The PC of today per-
viously reserved for the cumbersome workstations of dedicated hardwareand leased lines of the old line Wall Street professional.
execution into these systems, traders are better able to trade between the
forms  most  of  the  same  functions  for  the  remote  trader  that  were  pre-
THE PROPRIETARY TRADING SYSTEM
A PTS is proprietary software that combines real-time data feed with or-der entry capability tied directly to the exchanges. The PTS is designed torun in a Windows95 environment so that it is accessible to virtually any-one with a PC. Within the PTS execution alternatives usually include allthe methods for the electronic, negotiated markets, including SelectNet(NASDAQ's order routing system) and SOES (Small Order ExecutionSystem), along with access to the private Electronic Communications Net-works (ECN's), such as Island, Bloomberg or Instinet. For the floor ex-
tronic order routing to floor specialists for listed securities and options.
Flexible data feed delivery systems with proven records of delivering
The  best  PTS  will  deliver  orders  to  these  various  exchanges  in  less  than  onesecond.
real-time,  institutional  quality  data,  such  as  PC  Quote  and  S&P  Corn-
change  auction  markets,  execution  is  usually  achieved  through  theDesignated  Order  Turnaround  (DOT)  feature  that  allows  for  direct  elec-
stock, provide the market data for these PTS and are also considered the
tion of separate data feeds, offering choices from among a variety of in-
conducive to their trading style, and represents a significant improve-
off-the-shelf data providers offer. Traders not only receive their data in
"Vendor of Record." There are  now  also services  that offer the consolida-
stitutional  quality  real-time  news  feeds.  The  Windows  environmentallows  for  the  traders  to  configure  this  data  in  a  fashion  that  is  most
ment  over  the  rigid,  pre-determined  data  formats  that  many  traditional,
real  time, they can also configure their screens in order to see the direc-tion of the  market.  The data  can be  formatted to  appear  in running tick-
ers, extensive charts with applicable technical indicators that change with
price  movements,  time  and  sales  windows,  and  color-coded  NASDAQ
The set up of these windows is achieved with  the ease of simple  Win-
real-time P&L Tlte PTS software does have a learning curve, so it is im-
Below is a picture of the UltimaleTrador™.  a proprietary  system created
by A. B  Walley  (and  also  used by  Jeff  Cooper).  Each of the  displayed
choose  from,  le.,  NASDAQ  Top  100,  DOW  Jones  Utilities,  etc.,  01create  youj  own  ticker  with  stocks  you  are  mosl  concerned  with.Color indicators show up and down ticks. Prices scroll vertically 01
dow that has four parts. (1) The top most box shows fundamental
2.  NASDAQ  Level  II  Data  Window—This  is  a  multifunctional  win-
price and trading information.  (2) The box directly below it shows
who is on the price and for how much. (3) The little rectangular boxdirectly to the right of it Time and Sales for that stock. 4) This win-
double click on a bid, to sell, or an ask, to buy, and the Order Entry
The Order Entry Screen—The five buttons on the bottom portionof the screen show you how to route your order. The large windowabove them shows you all transaction history and serves as yourorder history file clerk.
3. 
dow  serves  as  the  entry  point  to  the  Order  Entry  Screen.  Simply
Screen pre-loads your order for review.
by symbol or text, depending on your preference for search criteria.All news is "clickable" and will bring up your story. Additional
4.  News—Real-time  Reuters  or  Dow Jones news  feeds  can be  filtered
features include new alerts.
5.  Charts—The  chart  function  has  roughly  35  analytics  and  studies
that can be overlayed on a symbol. Multiple symbols can be loaded
to others so that when you pull up a stock quote, or news, you can
into one chart for easy comparison. This function can also be linked
also have the chart generated automatically.
6. 
Positions—This is the window function that shows you your posi-
tions. It can be expanded to show price, profit, loss, last trade, etc.It is also one of the Order Entry Screen generation points. Simply
view an order pre-set for sending.
double click on a position to activate the Order Entry Screen to re-
7.  Market Index File—This is a  window to allow  you to  view multi-
ple indices in real time.
Stock Minder—This window does essentially the same thing as the
8. 
Market  Index  File  above,  but  in  this  case  it  is  used  to  watch  equi-ties. It is also an Order Entry Screen generation point.
The features  listed  above represent a  small portion of the available soft-ware potential.
It  is  also  very  important  to  note  that  there  are  system  requirements  forthis kind of a PTS. Although the PC requirements are very standard (rec-ommended  166  megahertz  processor,  32  MEG  RAM,  quality  Internet
minimum size. Many traders have installed dual video cards so that two
As with all hardware these days, bigger and faster is better.
Service Provider, keyboard and mouse) it should be noted that the size ofthe monitor is quite important.  17' inch monitors are recommended as a
monitors in tandem can be used in order to view more data with one PC.
Appendix
exploit this market access and price transparency, particularly in the OTCmarket. Transactions are completed with use of your mouse on the secu-
When a trader places a price through the system, the price becomes an
EXECUTION
The  greatest  asset  of  the  PTS  is  integrated  execution  in  order  to  fully
rity or by using pre-programmed hot keys. To execute the trade, anotherbutton is clicked and the trade is routed to the desired exchange or ECN.
actual part of that market.  The  executing broker who  provides  the PTSdoes  not  get  involved  in  the  transaction between  the  trader  and  the  ex-changes, but rather is extending its trading facilities to the trader via thePTS. The executing broker then reconciles the trades through the clearer.
The trading firm that routes the order for you is acting as a routing machine
and does not take the other side of the trade, giving you unparalleled mar-ket exposure and speed. Should the order be delicate or large, you may find
Reliability, speed, and integration are also central to the order entry com-ponent of the best PTS. True market transparency now allows you to ac-
that you want the firm to take your order and work it for you.
cess  the  inside  prices  simply by  choosing  the  pertinent routing vehicle.By using SelectNet,  the trader can select market makers directly at their
posted prices on Level n, or broadcast an order at or between the spreadto all market makers, as if it were a dealer-to-dealer transaction.
For trades of 1,000 shares or less, depending on the tier size of the secu-
rity, the Small Order Execution System will effect an almost immediate
confirmation  in  normal  market  conditions.  Additionally,  connection  toECN's  such as Island allows traders to bid or offer in between the spread,with the price appearing on Level II. These prices appear directly on thescreens  of  market  makers  and  all  other  market  participants  with  direct
lines into the ECN, and may be traded on by any or all these participants
up to the desired amount posted.
Orders are consistently sent to both die market makers and ECN, and in
the case of listed orders and options to the exchanges, in less than onesecond. On screen confirmation of trade execution is returned to the
trader's screen in an average of two to five seconds, depending on mar-ket conditions. Positions will automatically appear in the position min-
Appendix
trade over your buying power, recognizing new or exited positions in-
stantly.
der, updating constantly in real time. Another great advantage of a goodPTS is that the software will not allow you to violate exchange rules or
Some companies also allow pre- and post-market trading, usually access-ing Instinet, the most liquid vehicle during these "off" hours.
Proper management of PTS server capacity by the broker/dealer should
eliminate  concern about the  volume of clients  that  the  PTS can handle
and system performance levels in busy market conditions. System de-signs allow for a maximum of 100 percent simultaneous client capacity
usage,  a  major  difference  to  the  incomparable  browser-based  technology.Those of you who trade stocks on a regular basis using a browser based
on-line order entry vehicle such as ETrade, Ameritrade, and the like, arewell aware of the frustrations involved with congestion. Long delays in
pointing and outside of the true inside market due to the sale of orderflow. To top it all, these problems only occur if you can actually manage
Until recently, this type of information and execution has only been avail-
no longer be an issue with the evolution of the PTS.
confirmations and status reports are commonplace. Fills are often disap-
to connect to the broker. For the serious day-trader, these problems need
level for a fraction of that cost per month.
able  to  Wall  Street  professionals  and  hedge  fund  managers  at  a  cost  ofthousands of dollars per month. Now you can get involved on the same
Once you evaluate speed and transparency, coupled with service on acost analysis basis—no more giving up spreads to the broker and lessen-
losing position quickly.
ing the chance  of missing a price—a  PTS  can easily pay for  itself in  oneor two trades.  It is also especially helpful when you need to  get out of a
Let's go  through a typical trade.  You are watching IBM, for example,  as
one of your Cooper Trading momentum opportunities. A buy signal isgenerated. You will simply click on the ask, and an order entry screenwill pop up pre-configured for size, price, and other parameters of yourchoice. Hit the LlSTEp execution button which will already be set to buy(as you clicked on the ask), and your order will hit the specialist's book
in  less  than  one  second!  In  normal  conditions,  you  will  receive  an  on-screen  confirmation  of your buy  in just  a  few  moments  more,  and  the
PTS/trading firm. As a trader, it is essential to receive immediate, accu-rate and reliable client support. As a valued client, you should feel com-fortable with the firm with which you deal in that they can provide
position will show up  instantly  in the position minder, updating in realtime.
Trading  support  services  should  also  be  large  factor  in  choosing  a
support  for  the  software,  your  trading  activity  and  all  the  back  officefunctions that are essential to the proper maintenance and functioning ofyour trading day.
TELECOMMUNICATIONS PROTOCOLSAND  CONNECTIVITYIn order to directly address the increasing Internet capacity problems andthe  cost  associated  with  modem-to-modem hookups,  several  innovative
firms have created intelligent connection alternatives. In order to assurethat your trading day is never interrupted and runs as smoothly as possi-ble, there are two different types of telecom protocols with which youshould be familiar; dedicated bandwidth service and cable modems.
bandwidth for their clients only. What this means is that they afford you
Some  firms  offer  proprietary  telecom  connections  based  on  dedicated
the option of a private telephone "road" to their servers and systems. ADedicated  Port  Service  (DPS)  is  based  on  "frame  relay"  telecommunica-tions  technology.  For  a  fixed monthly  cost of approximately $350  (or  ap-proximately $17 per business day), you are assigned a unique, personalLOCAL  telephone  number  affording  you  unlimited  access  to  the  com-
pany's data and proprietary trading network. This service uses a point-to-point connection via "frame relay," without involving Internet ServiceProviders (ISP) or intrusive Internet traffic. In essence, you are on a vir-tual WAN (Wide Area Network) via a local call. This kind of DPS shouldbe available in nearly all U.S. metropolitan areas and selected cities over-seas (higher costs are associated with overseas usage). You can connect to
Through this connection solution you can avoid the Internet completelyand transact your business on a proprietary network backbone. Your con-nection is more stable, more reliable and faster than ISP connections, and
much cheaper than traditional modem-to-modem hookups.
these DPS systems via 28.8, 33.6 and in some cases 56kps modems. Con-nection really depends on the local carrier capabilities.
Appendix
data delivery game. Cable modems deliver the Internet to your home
Cable  modems  have  also  dramatically  changed  the  rules  of  the  Internet
and 15 times faster than an ISDN line. With a cable modem connection,
computer up  to  100 times faster than the standard 28.8  dial-up modem,
10  meg  files  download  in  about 52  seconds,  in  comparison  to  about 47minutes with a 28.8 baud modem.
The cable is connected to your personal computer through an externalcable modem. The same cable line that provides dozens of channels to
your  television  can  simultaneously  send  data  back  and  forth  betweenyour  personal  computer  and  the  Internet.  This  technology  is  referred  toas "broadband technology" and transmits data at speeds up to 100 times
faster than a standard 28.8 kbps telephone modem. Typically, cable mo-dems operate at speeds in the range of 1,500 to 3,000 kbps.
There are no "handshaking" delays with the cable modems and connec-tions are instant. Just log on and go. And because cable modems are in-dependent of phone connections, there's no clocking of incoming calls, no
the company suggested that they would offer their service in competitionwith WebTV. They have plans to market their browser on store shelves
costly second phone line or ISDN connections to install and maintain.
There  are  several companies who  are  starting to provide  this  incredibleservice.  ©Home is the Netscape of the cable  world.  A spokeswoman for
soon. Currently several cable companies are offering the ©Home browser
as the browser of choice when an installation is being done.
You will need to contact your local cable provider for details regarding
cable modem service. The service is not currently available in all areas,
however,  most providers  plan  on  offering  national  access  by  the  end  ofthe  year.  Local  cable  companies  such  as  Cablevision  give  a  detailed  de-
scription of their service.
Typical  monthly  subscription  prices  are  $29.95-$49.95.  Installation
charges for dial-up services, ISDN services, and second telephone lines
lation fee covers: cost and installation of a Networking Interface Card
vary by  provider and typically range between  $75  and  $250.  Cable com-panies typically charge a one-time installation fee of $99-$175. The instal-
(NIC card) in your home computer, splitting and running the cable wireto  your  home  computer  anywhere  in  your  home,  installation  and  con-
figuration of a customized Netscape or Explorer browser, and a personal-ized overview of the service.
Cable modems make very good sense and should be looked at very care-fully. They offer greater capacity and stability at an average lowermonthly cost.
trades when you open an account), call them at 1-888-229-2853 or 212-647-
/ would  like  to  thank Jonathan  Priddlefor taking  the  time to write  this  section.  Ifyou  would  like  to  learn  more about A.  6.  Watley services  (and  to receive five free
1600,  ext.  618.  Don't forget  to  say  that  you  heard  about  A.  B.  Watley fromCooper  Trading  to  receive  the  extra  benefits.
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