Hybrid survey; halting bad trades; plus, Info Memos for beach reading

By: Ray Pellecchia

File Under: NYSE

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I'm all links today. I'm on vacation next week, so here's a bit of news recap; some beach reading for traders, regulators and techies; and a dose of holiday celebration to send you off.

First, a colleague just forwarded this e-mail pitch from Traders magazine:

The Lowdown on the NYSE's Hybrid Market -- The New York Stock Exchange rolled out its "Hybrid Market" in the spring and became a fast market under the Securities and Exchange Commission's Regulation NMS. Traders Magazine conducted an anonymous electronic survey of 2,941 buyside and sellside traders. So what do traders think of the NYSE's Hybrid? Twenty-eight percent of buyside and sellside traders surveyed said they are in favor of the NYSE transforming itself into an ECN. Another 33 percent said they would like the NYSE to preserve its specialist system "with some changes," while 15 percent would like the current specialist system maintained as is. Finally, 24 percent would like the NYSE to switch to a multiple market-maker system. Read more about the survey results -- including what traders think of specialists, floor brokers, and how the NYSE is responding to regulatory and market-structure changes -- in our July STANY 2007 issue.

Should be an interesting read. I think the positive ratings will go even higher when we make the changes we envision and truly capture the potential value of Hybrid trading.

On a somewhat related note: forgive me for making yesterday's order errors a two-day story, but I can't help myself. When I see validation of the value of carbon-based life forms in the exchange of securities, I'm going to billboard it. So here are a couple of additional press pickups of yesterday's situation involving erroneous orders.

NYSE halts erroneous trades: The New York Stock Exchange was forced to halt trading in three stocks early on Thursday after erroneous orders from a broker were spotted by an NYSE specialist...The specialist’s action was seen by some observers as a vindication of the exchange’s hybrid system, which combines electronic trading with the more traditional floor-based model. Analysts have widely predicted the exchange would inevitably move towards an all-electronic model. But the checks and balances provided by the specialist system are seen by some as an essential part of quoting reliable prices. (Financial Times)

Fidelity Linked to NYSE Glitch (TheStreet.comTV)

There's also a companion print piece on TheStreet.com, but it's premium content.

Second, here's the beach reading, so to speak: there are three NYSE Regulation Information Memos that I haven't seen picked up in the press but may be of interest to those involved in making the financial world actually work. Been meaning to write longer pieces about a couple of these, but let me at least post links now, and do the rest of my procrastinating later.

SHORT INTEREST REPORTING is going to change to twice a month -- from once -- to "provide additional and more timely information to public investors and other interested parties related to short selling." In my Media Relations days, short interest was often little noticed but always generated near-fanatical and highly vocal interest among a certain subset of investors and people on the Street, not to mention the companies whose stocks are involved and the firms that report the data to us, and it was big deal if a firm misreported numbers and a correction had to be made. For these parties, I believe the change to reporting twice a month is a significant one. (NYSE.com)

PROGRAM TRADING UNDER RULE 80A -- The definition of program trading is being updated, the term "coordinated strategy" is being clarified, and there are new reporting obligations for member firms involved in the practice. Reporting on program trading was one of my first jobs when I got here in 1988, and it was a much bigger issue in that post-October 1987-crash era. Like short interest, it's still a big deal to a big subset of people, and thus the link. (NYSE.com)

BLOCK CROSSES OUTSIDE THE PREVAILING NYSE QUOTATION -- RULE 127: The purpose of this Information Memo is to remind members and member organizations regarding the proper way to effect block crosses outside the prevailing NYSE quotation under NYSE Rule 127 in the Hybrid environment...In connection with Phase III of the NYSE HYBRID MARKET(SM) (“Hybrid Market”) implementation, the Exchange modified Rule 127 concerning block-cross transactions outside the quoted market. The NYSE is issuing this reminder regarding the rule for specialists and brokers on how to effectuate block crosses using NYSE trading systems. (NYSE.com)

Last but not least, NYSE Group markets will be closed Wednesday, July 4 to celebrate Independence Day, and additionally will close at 1 p.m. on Tuesday, July 3 to give you some extra time to gas up the grill or whatever you're doing. Me, I'll be at our local Main-Street parade, and later, fireworks over the pond at the town park. It's just perfect. They always play "Stars and Stripes Forever" for the fireworks finale, and I don't know of a more stirring piece of music for that purpose. Happy holiday, folks. Take a minute and think about our hard-won rights, and our liberty. Have some watermelon. See you back here on July 9.

Tags: New York Stock Exchange, Hybrid Market, NYSE, NYSE Euronext, NYX, trading, stock market, trading floor, specialists, brokers, AT&T, Wyeth, Jefferies