Over the past 20 years, more than 30 alternative trading systems have been formed to offer an alternative to the NYSE and Nasdaq.
Fallout
"They are ... just really an alternative place to meet other than the floor of the exchange, and they are in competition," Wagner said.
But a number of the entrants have gone out of business, leaving about a dozen firms that typically target a particular investment audience. Some serve retail customers, others, like Pipeline, focus on large traders.
One of the most notable failures among the competitors came four years ago when OptiMark dissolved its operations after sinking more than $200 million into the business.
Critics said the system, designed to help traders execute large trades confidentially, was too complicated and trades couldn't be processed quickly enough. Despite the financial backing, OptiMark couldn't attract enough buyers and sellers to survive.
Two of Pipeline's biggest competitors are Liquidnet and HarborsidePlus, both based in New York.
Liquidnet opened 3 1/2 years ago and trades about 25 million shares a day. It has 109 employees and opened an office in London two years ago.
"We have been very successful since the first quarter of operations," said Eskandar, Liquidnet's director of corporate strategy.
Eskandar said he sees "limitations" with Pipeline's strategy because it's never clear whether parties involved in a trade are buyers or sellers, so it may take longer to match parties and complete a trade.
"It takes a longer time to build a critical mass of liquidity," Eskandar said. "You have to hope that different people on different sides come in."
Michael S. Cashel, president and chief executive of HarborsidePlus, which employs 23 people, said one of the biggest challenges is integrating the trading system with the client's order management system and getting past bureaucratic red tape.
"If you can figure all that out, then you have a shot" at success, he said. "There are a lot of companies that have cropped up in the last few years. I don't think anybody has cracked the code yet."
Roland Park home
Like a salesman, Berkeley, who during the week lives at the Yale Club near his office in Midtown Manhattan and at his home in Roland Park on weekends, has been visiting firms across the country. In Baltimore alone, he has met with traders at T. Rowe Price Group Inc., Legg Mason Inc. and Wachovia Securities.
The system has been installed on more than 40 trading floors, including those at Fidelity Investments and T. Rowe Price. Volume has been picking up and has ranged from 1.5 million to 4.5 million shares in a day. That's a small fraction of the roughly 1.4 billion shares each traded daily on the New York Stock Exchange and Nasdaq.
"The initial signs are favorable," said Andrew M. Brooks, head of equity trading at T. Rowe Price. "This is being received as offering something unique vs. the other vendors out there. It is too early to tell whether this has staying power. Certainly the people behind it are smart people."
Said Chris Bartlett, head of equity trading at Wachovia Capital Markets in Baltimore, which plans to give Pipeline's system a test-ride: "I wouldn't bet against Al."
Berkeley, who owns about 5 percent of Pipeline's parent, insists that he isn't afraid of failure.
"If we fail, that is what free enterprise is all about. I will tell you, yes, we don't intend to fail. We are attacking a real problem and that gives me confidence."
About the exchanges: A look at what makes them different:
Pipeline Trading Systems
A trader uses a password to link into Pipeline, and a small Windows dialogue box appears on the computer.
If the trader wants to trade a stock, he is alerted by Pipeline's "Block Board" that there is interest in the shares when the ticker symbol turns orange on the display.
The trader knows only that someone is interested, but is not certain whether they are a buyer or seller. The trader clicks on the ticker to find out the price range of the shares.
The trader places a buy order by clicking the mouse. If there is a seller, the sale is made.
NYSE
A trader phones or wires an order to a NYSE member firm on the floor.
The member may use a floor broker to carry the order to the "specialist" post or route it electronically to the specialist where the stock is traded.
At the post, the specialist, acting as auctioneer, makes sure the trade is executed fairly.
When the trade is completed, the specialist sends a confirmation to the firms that bought and sold the shares.
NASDAQ
A trader wants to buy a stock and places a phone call to a "market maker" who may choose to fill the shares out of inventory or search electronic exchanges to see if the shares are available.
The market maker sees quotes from various markets displayed on a computer screen. He enters the number of shares desired and maximum price he will pay, and the transaction is completed.
