The what, when, why about PPY

By: Ray Pellecchia

File Under: NYSE

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The latest chapter of the Hybrid Training Program provides all you'd ever want to know (and probably then some) about PPY (Priority, Parity and Yielding -- hey, I knew that one!).

Excerpts:

What is the impact of the Hybrid MarketSM on PPY rules?

Certain new features within the Hybrid Market are addressed by PPY rules and regulations as follows:
·Quoted interest goes ahead of non-quoted interest (e.g., reserve e-Quote(SM).
·DOT orders, e-Quotes, and d-Quotes are on parity after priority has been broken.
·Specialist s-Quotes yield to DOT orders. Certain manually entered specialist interest (e.g., PRIN quantity) yields to all interest, including reserve e-Quotes.
·e-Quotes, d-Quotes and s-Quotes are on parity after priority has been broken and DOT orders are satisfied.

There's also this, which I had never heard before:

What is a floor-clearing event?

Certain events clear all of the priority claims and result in all interest at that price being on parity. Examples of floor-clearing events are executions at or through the quote price; full cancellations of the priority bid/offer; and cancel/replacements of the priority bid/offer. A floor clearing event does not affect the specialist’s requirement to yield to the Book.

I had always thought an example of a floor-clearing event was the time that Cindy Crawford and Claudia Schiffer walked across the floor to promote the IPO of Revlon. The seas parted. Then again, I also thought the initials PPY sounded like something in the title of a Prince song, like "Luv ur PPY."

But I digress. Hey, it's Friday afternoon. Anyway, this episode of the Hybrid Training Program also comes with a trading example, no extra charge. Recommended reading.