• Jul
  • 30
  • 2007
  • 11:54 AM

The hidden part of the iceberg, Part 2

By: Ray Pellecchia
File Under: NYSE

Following up last Friday's The Hidden Part of the Iceberg, here are a couple of additional news articles on the same subject, plus a question on another topic.

NYSE specialists' role questioned anew -- The role of specialist traders on the New York Stock Exchange floor was called further into question a day after the Big Board's electronic systems successfully handled nearly 6 billion trades as the stock market plunged. (Reuters)
[I believe they mean 6 billion shares, not trades. And to answer the question the article raises, specialists should continue to have a role -- trading when appropriate to minimize volatility and keep trading continuous -- and I believe we'll see them perform that role more fully when we get a couple more regulatory building blocks in place. -- RP]

Dow Computer Glitch Delayed Average Calculation (Update2) -- A computer error by Dow Jones & Co. caused an 11-minute delay in the company's benchmark industrial average yesterday as U.S. stocks plunged the most in five months and the New York Stock Exchange had its busiest day ever. The value of the index was off 17 points to 25 points from the underlying price of its 30 members between 2:57 p.m. and 3:08 p.m., said Sybille Reitz, a spokeswoman for the company. ``We did have some very slight system latency,'' she said. (Bloomberg.com)

Happy Monday, folks. Here's a bit of discussion from Friday's post to noodle on. Any additional thoughts welcome.

Nice reading today!

Keep up the good work.

Oh yea ...

I'm a large NYX shareholder.

Anything you can do ... to get the stock price up ...
Would be greatly appreciated.

Thanks ... Ron

by Ron on July 27, 2007 12:43 PM

C'mon Ray, what year?

It's hard to gauge... the music taste says you were born in 1949, but the "hip" blogging says no earlier than 1970.

Anyway, happy birthday.

-DT

by Dinosaur Trader on July 29, 2007 6:26 PM

Thanks for the birthday wishes, all.

DT, you bookended my age just right. Split the difference between 1949 and 1970, and you have it: I was born in 1959. Like I said, ancient.

Ron, on the stock price, wish I could help. We're all doing the best we can, me included. Hey, I wonder if anyone has ever studied the effect (if any) of a corporate blog on a company's stock price. That is, do the stocks of companies with blogs fare better than those without? If anyone has ever looked at that, I'm not aware of it. Anyone?

Might be a good idea for an index -- the Blogging Companies Index.

I don't think that a corporate blog in and of itself would be material, but perhaps it is an indicator of a company that is more open and responsive to customers. I'd like to think that's the case.

BTW, I just checked, and our stock closed at 56.50 on 9 Dec. 2005, the day this blog was born. Any gains between then and now, I claim all the credit. :>)

by Ray Pellecchia on July 30, 2007 8:47 AM

And speaking of significant dates, On This Day: The great "Perfesser," Casey Stengel, was born on this day in 1890. And Sam Phillips -- no less great -- founder of Sun Records, died on this day in 2003. (NYTimes.com)

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Comments

Ray,

Cramer (I know... I know...) was on CNBC today and said that there was a problem with the quote information around 2:45 on Friday afternoon. He said the Dow quote was way off or something like that.

You have anything on this?

Thanks, DT

by Dinosaur Trader on July 30, 2007 3:01 PM

Ray, I don't understand what the beef is with the specialists? I mean they play only a small role now and basically just make sure the market operates correctly and hopefully they will be allowed to add more price improvement & matching to add further value to the NYSE. Why do they always want to question their role? Your customers don't want an all electronic exchange. They want a true "Hybrid." I am tired of people who probably don't even trade or work in the industry that only have an ax to grind. Thanks

by tony dey on July 30, 2007 6:27 PM

DT -- I haven't seen the CNBC segment, but here are the facts:
1) NYSE systems operated fine -- no glitches, no delays.
2) Dow Jones had a problem that they acknowledged in the article I citedhere.

That's all there is to this

Tony -- There are some old, negative myths about specialists that linger despite all the changes we've made or that have otherwise happened in the last 3 1/2 years. People should evaluate the facts as they are today. I think that would lead them to conclude that there's an important role for specialists to perform in today's market, as you state.

by Ray Pellecchia on July 30, 2007 6:50 PM

Tony - I would like to see price improvement and matching just as much as you do, but I don't think its going to happen under this current hybrid system. It doesn't seem that current structure of the hybrid market could handle price improvement and a new structure with completely different rules would have to be developed. I trade about 100k shares a day and since the hybrid market went online I've never experienced price improvement.

Ray - care to shed any light on the possibility of price improvement (if its even physically possible). Maybe point us to some reading materials?

by Ron on July 31, 2007 1:23 AM

Ray,

Huh... Cramer was making a stink about only 13 points?

Lame.

-DT

by Dinosaur Trader on July 31, 2007 8:09 AM

Ron -- Price improvement technically is still possible, but the current rules make it too difficult for specialists to provide price improvement, and don't provide enough incentive for them to do so. We are working on addressing this by changing the rules that govern how specialists are compensated and how they can participate in the market. I'll let you know as soon as those proposals are filed.

At the same time, I should point out that a different type of price improvement has occurred under Hybrid. Effective spreads tightened to 5.2 basis points in first-quarter 2007 from 5.5 bps the previous quarter, and quoted spreads shrank to 27.8 bps from 32.9 in the same period. I know this is not the same type of price improvement you're talking about, but it does indicate to me that even if your order isn't getting executed between the bid and the offer, at least the spread between the two is tighter.

Thanks for writing, Ron!

by Ray Pellecchia on August 1, 2007 9:56 AM

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