Hybrid 101: Discretionary e-Quotes

By: Ray Pellecchia

File Under: NYSE

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The latest chapter in our Hybrid Market Training Program series explains all about NYSE Discretionary e-Quotes.

Quick excerpt:

Discretionary e-Quotes extend the capability of e-Quotes by introducing additional features that electronically replicate aspects of the more sophisticated types of judgment that floor brokers exercise today on behalf of their customers.

The core elements introduced with Discretionary e-Quotes are pegging and pricing discretion.

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Pegging allows floor brokers to automatically keep their interest in the quote even as the quote moves.

Floor brokers will be able to turn on a pegging feature and designate a price range specifying a ceiling or a floor price beyond which the discretionary interest will not move with the BBO. As long as the BBO remains within the specified range, the Discretionary e-Quote will be quoted in the NYSE BBO and eligible for automatic executions.

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While pegging keeps interest in the quote, pricing discretion allows quoted interest to actively reach out and initiate trades with opposite-side interest at price points above or below the Discretionary e-Quote’s quoted price.

The quantity of an e-Quote designated to exercise pricing discretion is called a d-Quote. The entire e-Quote can be designated as a d-Quote.

d-Quotes may trade with any size contra-side interest, or the floor broker may set a minimum and a maximum size parameter dictating that the d-Quote will not trade with an order of that size quantity.

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