• Jun
  • 04
  • 2007
  • 10:30 AM

Connecting, in the Asia-Pacific markets

By: Ray Pellecchia
File Under: TransactTools

Happy Monday, folks. Not too much to report this morning but a bit belatedly I came across an interesting post on Connected, the blog of Sam Johnson, the CEO of NYSE TransactTools. Sam talks about issues discussed at the Asia-Pacific Trading Summit. Excerpt:

Standardizing Asia-Pac Market Access -- ...The international players got up on stage and bellowed that we need standardized (FIX) connectivity to exchanges across Asia-Pac to create efficiencies and lower the barriers to connectivity; the exchanges themselves, however, pointed out that their membership isn't in any real hurry to move from proprietary to open/standardized access.

And why should they be? They have a great advantage as it is. I met with a client just yesterday who reminded me that, while clearly not long-term sustainable, proprietary/closed technology is sticky and provides a competitive advantage to those who have it.

Timing is interesting here, as many of the Asia-Pac exchanges are right now going through major technology reviews and re-architectures to deal with rapidly growing demands for capacity and performance, and this would be an ideal time to tear out the old proprietary APIs. But they won't standardize for the sake of standardizing; they'll do to attract more orderflow, which will come from overseas, where the customers have already adopted these standards. (Connected)

And since it's a rather gray Monday here, here's a little historical trivia to lighten the mood, including stuff about the Boss and the King:

On This Day:
-- 1984: Bruce Springsteen releases "Born in the USA."
-- 1992: The U.S. Postal Service announces results of a nationwide vote on the Elvis Presley stamp, saying more people preferred the "younger Elvis" design. As opposed to the "fat, Vegas-jumpsuit Elvis" design, I suppose.

Today in NYSE History: 1953 -- Woodcock, Hess and Co., Inc. of Philadelphia became the first NYSE member firm to incorporate; previously, all firms were partnerships.

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Comments

I believe connecting all markets is important work but i really wish the NYSE would get the HYBRID working correctly by giving the specialists the ability to price improve & match at a much higher percentage before expanding to other market centers. We all know markets go up as well as down so lets not wait until we have another meltdown before correcting the obvious problems associated with the lack of liquidity that all the new changes have caused. Please understand that iam a loyal customer of the NYSE and i only want it to be a better place to do my business. Thanks Ray.

by tony dey on June 4, 2007 11:34 AM

I agree with Tony. I would also like to add a question. Is the nyse being hancuffed to adjust their hybrid market because of the new reg nms rules? I've read that the reason hybrid was created was due to these new rules. The sec needs to be made aware of the negative effect reg nms has had on market quality and also price discovery. The ability to choose price as well as destination is something that a trader should be able to decide. Not the sec. I feel there should be a serious effort to have reg nms done away with. This would allow the markets to make the changes they need for increased volume, liquidity, and profitability.
Thanks again for the space to speak about our concerns.

by josh on June 4, 2007 3:14 PM

The SEC has created more problems than it solved with all these new changes instead of letting the market place determine structure changes. Now thanks to the SEC you get the "Best Price" but at what additional cost? I would rather have the ability to get price improved or matched then be routed away to who knows what market and at what price. I guess the SEC has never heard of the saying "The Road To Hell Is Paved With Good Intensions" It also seems that the SEC was successfully lobbied by the regional exchanges. Thanks

by tony dey on June 4, 2007 7:02 PM

Couldn't agree more with the above comments. Yesterday was another day where the NYSE was having "streetwide issues" that affected trade for a little over an hour.

Get the Hybrid Market right first before you start adding all this other stuff.

And like I posted in another section, "price improvement" is great, but if I'm being charged for fills by third parties (the NYX) it's not so cool... it's basically doubling my commissions on trades that are shipped beyond my control.

Yet another reason not to use market orders I guess.

-DT

by Dinosaur Trader on June 5, 2007 7:43 AM

Thanks, everyone for the comments. A few thoughts:

I want you to continue to use this space as a forum, but if you have a comment directed to the SEC, I think you also ought to send them a note, which is the only certain and official way of making sure they see it.

On the idea of focusing on Hybrid before moving on, please be assured we're not taking our eye off the ball. But also please be aware that there are other divisions of this company that are not focused on Hybrid, and I'm going to be including them in the blog, as I think this medium can add value to other businesses.

Re: Hybrid Market and Reg. NMS, we created Hybrid as a response to our biggest customers' desire to be able to trade automatically and anonymously. It was actually announced before NMS was. But as we developed Hybrid, the timing coincided with the rollout of NMS and of course we developed Hybrid with NMS compliance in mind; the entire industry has had to adapt as well. In the end, the market had to offer the ability to trade electronically, whether you approach that end from the means of customer-driven evolution or market-structure regulation. What matters now is where we go from here.

On the comments about the NMS, I think you have to keep in mind the factors that prompted it. Among them: market-structure regulation had not changed significantly for 30 years; during that time, new markets and ways of trading had emerged; and there were issues that needed to be addressed such as the proliferation of trade-throughs.

As Duncan Niederauer said last week, we're working on a number of things to strengthen our makret, and I'll keep you posted as we make progress. Thanks again for the comments, and keep 'em coming, folks!

by Ray Pellecchia on June 5, 2007 9:18 AM

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