• Apr
  • 18
  • 2007
  • 11:32 AM

Reg. NMS and innovation; gearing up for bonds; first female specialist; more

By: Ray Pellecchia
File Under: Bonds, NYSE

Will the SEC's National Market System Stifle the Innovation it Hopes to Promote? -- In a new paper, Wharton Prof. Marshall E. Blume argues that in the end, Reg. NMS will give NYSE and Nasdaq virtual monopolies. (Knowledge @ Wharton) [Me, I'm obviously a little too close to be very objective about this, but I see competition only increasing, i.e., firms re-investing in regional exchanges, derivative markets like ISE entering equities, markets like BATS popping up, and dark pools proliferating. -- RP]

NYSE Preps for Monday Launch of NYSE Bonds -- The new bond system will launch on Monday starting with the 820 CUSIPS [ 9 digit Identifiers given to bonds] that are now trading in ABS. “The ABS system will be shut off on Friday, and we’ll turn on the new system Monday,” says Homan. He notes that the system has been in testing for months. The plan over the next two months is to rollout tranches of 500 additional CUSIPS until the system reaches approximately 4,000 of the more liquid corporate bonds. “At that point, we’ll decide if we want to move into the less liquid CUSIPS,” Holman says. (AdvancedTrading.com)

Today in NYSE History: April 18, 1980 -- NYSE's first female specialist, Amy W. Newkirk, is admitted to membership. (nyse.com) [To this day I find it embarrassing when discussing our history to have to tell people that we didn't have a woman member until 1967. Having no female specialists until 1980 adds insult to that injury. I'm proud that NYSE has long had a staff Diversity Council to promote an open, inclusive environment as essential to ensuring our business success (disclosure: I'm a member), and I applaud efforts to do the same on the trading floor. -- RP]

Also On This Day: 1923 -- The first game was played at Yankee Stadium in New York City, with the Yankees beating the Boston Red Sox [who else?], 4-1. (nytimes.com)

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Comments

Prof Blume's RegNMS article: Too early too tell whether he is right or wrong; however, FIF (http://www.fif.com) did some preliminary analysis that some NYSE and Nasdaq stocks were traded away from the primary exchanges (ie, empirical proof)

by Thomas W. on April 18, 2007 3:13 PM

I think just the exsistance of "Dark Pools" proves that people want the ability to execute trades at one price indicating to me that fragmentation has really destroyed the quality of our equity markets. I believe that eventually the NYSE will have their own Dark Pools for block trades and for traders who prefer one price with a possible nickel spread. Thanks.

by tony dey on April 18, 2007 8:22 PM

I was under the impression that specialist interest published away from the national best was not seen on Open Book. However, I have noticed bid/offer responses to removal/adding to specialist bids/offers away from the market. Can you please let me know if there is any merit to my belief that algos are able to read Spec Interest away from the market?

by Ryan on April 19, 2007 11:00 PM

Unfortunately, I've had to include another post on my blog regarding trading irregularities associated with the changes from the Hybrid market.

It's nearly impossible to control intraday risk with this system.

I'm perplexed and discouraged.

-DT

by Dinosaur Trader on April 23, 2007 10:49 AM

Couldn't agree more DT. This hybrid market is so dirty. No available liquidity. Some seem to have privileged access. Just about every trade I make I am being cheated. Even if its for a fraction of cent...I am still being cheated. Some must be making out big time while others suffer.

by Ron on April 23, 2007 7:30 PM

Well, I'm not saying anyone is being dirty just yet. I just think that there are these pockets of illiquidity that somehow need to be addressed. Specialist void is really what they seem be...

Somehow those gaps need to be filled. Hope there is some plan.

-DT

by Dinosaur Trader on April 24, 2007 4:03 PM

I have to agree also. I think there should be no such thing as "Hidden Interest" its just not fair to the public not to be able to access liquidity and see where the real size is. We really need some answers but iam still trying to stay positive and give the NYSE time. Its very fustrating though. If anyone has any info please share it with the rest of us. Thanks.

by tony dey on April 25, 2007 9:48 PM

Ryan -- Your impression is correct: NYSE does not publish any specialist interest to OpenBook, regardless of its limit price or relation to the current market. Specialist interest at the best bid or offer is reflected in the quote, but not displayed in OpenBook.

Given that, I can't account for the phenomenon you're observing.

Thanks for writing, Ryan, and thanks also to my colleague for help with this answer. Apologies for getting back to you late, Ryan.

Everyone else, thanks for the comments. As you know from more recent posts, we're working on it.

by Ray Pellecchia on May 2, 2007 2:17 PM

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