Improving price improvement; paying for performance; building Bonds; more

By: Ray Pellecchia

File Under: Bonds, NYSE, NYSE

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For those of you interested in price improvement and market quality (and isn't that just about everyone?), I would recommend listening to listen to a couple of excerpts of yesterday's conference call about NYSE Group quarterly earnings. The earnings got almost all the news coverage, which is understandable, but mostly overlooked were good updates on two topics:

1) Moving to a new system of paying specialists for performance -- this might not be ready in time to implement on June 1 as originally targeted, but it sounds like it's making progress and is a high priority; and

2) Increasing price improvement -- we're talking with the SEC about making it easier for specialists to provide price improvement and add liquidity without artificial hurdles. The expectation is that doing this would also give other market participants a competitive prompt to step up; news expected on this in a few weeks.

If you click on the webcast and don't want to hear the whole call, you can use the button controller to advance to minute 58:00 (approximately) for the first discussion, and 1:09:45 for the second discussion.

I mentioned that the earnings got almost all the news coverage, and I wanted to note that Bloomberg did run a piece on the pay-for-performance issue.

Some other links of possible interest:

The Bank of New York Company Inc.'s Pershing Unit to Become Market Maker on NYSE Bonds(SM) Platform : Pershing, a subsidiary of The Bank of New York, has enhanced its fixed income market-making capabilities by becoming a new market maker on NYSE Bonds. As an NYSE Member and market maker on the NYSE Bonds platform, Pershing's fixed income trading desk will be a liquidity provider and have the ability to electronically enter orders to buy or sell bonds listed on the new platform. (Pershing/via PRNewswire)

Maybe U.S. Markets Are Still Supreme; Study Finds No Proof That Sarbanes-Oxley Tarnishes the Allure : In a new study, they conclude there is no evidence the much-criticized 2002 Sarbanes-Oxley Act, which beefed up corporate accounting and financial disclosures, among other things, increased London's appeal to foreign companies at New York's expense. The study looked at thousands of companies that either listed, or didn't list, their stocks on various U.S. and London markets from 1990 to 2005. The research also found that investors are still willing to pay a sizable premium for foreign-company shares listed in the U.S., in return for meeting tough U.S. regulatory standards. Foreign-company stocks in London receive no similar premium, they said. (Wall Street Journal Online)
[The article quotes our Chief Economist Paul Bennett raising what I think is a good point: the issue is not whether investors assign a premium to non-U.S. companies that list in the U.S.; the issue is whether non-U.S. companies are willing to "grasp that premium," as Paul puts it, given the U.S. regulatory and litigation environment. -- RP]

Best Execution: "I appreciate the spirit of best execution. But it has resulted in a few unintended consequences. For smaller players, getting paid for one-on-one's and research is harder than ever. I am not convinced their extinction will be good for Wall Street's eco-system." (underthecounter blog)

Bank of America, UBS Capture Best Stock Prices for Managers: Just before noon, the order flickers across a computer screen at JPMorgan Chase & Co. in New York: Sell 25,000 shares of Obagi Medical Products Inc. ``This is going to be a hard trade,'' says broker Tony Baumer, as stock prices and instant messages light up five computer screens in front of him. Obagi stock has been sinking ever since the Long Beach, California-based drugmaker went public at $11 a share in December 2006. Now, on Jan. 22, Obagi is trading at $8.75, a record low. Baumer's challenge: to unload his client's shares without pushing the price even lower. As competition pinches commissions, brokers such as Baumer are trying to win over money managers by getting the best possible price for the shares they trade for them. (Bloomberg)

CNBC TV 18 partners with the New York Stock Exchange : Business news channel CNBC-TV 18 has tied up with the New York Stock Exchange to provide Indian investors a daily perspective on global markets. As part of this alliance, a correspondent of CNBC-TV18 will present a daily market link at 4.15 pm, when the market closes. In addition to this individual and corporate investors in India can gain access to the daily updates from NYSE and exclusive interviews with CEOs and other corporate entities listed on NYSE. The Indian investor can track the performance and listings of Indian stocks on NYSE and receive unique insights on the plans and positioning of global companies for India. Commenting on this new development CNBC-TV18 managing editor Senthil Chengalvarayan said, "CNBC-TV18 endeavors to give investors in India a view from the heart of global business. With the reduction of barriers in trade, increased global mindsets and concurrent investment opportunities and Indian companies acquiring and raising funds from abroad, there cannot be a more opportune time for such a remarkable alliance between teo leaders. We believe that adding value to viewers depends on our leverage, access and leadership globally and this is another step in that direction" (IndianTelevision.com)

Born On This Day: Kate Pierson, 59, of the B-52s (NYTimes.com)

Tags: New York Stock Exchange, Hybrid Market, NYSE, NYSE Group, NYX, trading, stock market, bonds