hey ray,

I actually think the hybrid market is working incredibly well. I was a big skeptic at first, but now have grown accustomed to slightly more volatility. As new order types and a better understanding from the trading public, the NYSE will continue to evolve for the better. I do have one quick suggestion that harkens back to 1 of my original posts some 8-9 months ago. Is there any way to free up the LRP so it is not so restrictive. When trading opens for just about any stock with considerable news...the LRPs seem to constantly get hit for the 1st 30min -1hr of trading....If we just extend them maybe 50 or so more cents on both sides, i think trading would be much more fluid as soon as the name opens.

by jt on July 23, 2007 1:40 PM

I just posted this comment on the previous post, but I thought it would be appropriate to comment again since this post did such a great job of praising the specialists.

I read an article a month or so back that said the specialists would walk if their situation did not improve by Labor Day. Ray, what ever happened to the much talked about specialists incentives?

by Ron on July 23, 2007 3:57 PM

Ron - About a month ago the NYSE revenue sharing program for specialists was extended to August - with $26.5mln in subsidies on the table. As of June of this year, NYSE already paid out over $55mln since the subsidies began around January 2007. Thanks.

by Vlad Khandros on July 24, 2007 7:34 AM

Hi Ray,

**** I sent this comment the other day and am hoping you'll be able to get back to me regarding the answers. Here is the original comment I sent the other day. Thanks in advance for your insight:

I have a couple questions that have been on my mind and am hoping you can shed light on for me.

1) Is there any work towards enabling the trading of ordinary shares listed on Euronext
on the NYSE?

For example, Unilever lists two ADRs, but there's no way currently to trade the ordinary shares on NYSE.

Wouldn't the development of this ability would give investors greater flexibility while enhancing competitive barriers?

2) Also, great to see the migration of ETFs to Arca's world-class system. Will specialists be involved at all with listed ETFs once they've migrated? Have you guys quantified the cost savings involved with this switch or is there a way to model this (for each ETF that moves to Arca there will be an incremental net savings of X per X)

3) Are shares that trade-away from NYSE but get done on Arca considered matched?

Thanks in advance for your insight. And as always, please keep up the great work -- "Exchanges" is one of my favorite reads!

barry

by Barry K on July 24, 2007 9:24 AM

Ray,
Sorry to swamp your inbox, but after reading the exchange of comments between you and Sol Rosenberg regarding the recent "spesh-saves-the-day" event, I wanted to ask yet another question...And then, I'll hang up and take my answer off the air.

You allude to Specialists knowing their stocks. That's such an accurate statement -- perhaps they know their stocks better than anyone.

That proprietary knowledge (some of it tacit, to be sure, yet some of it easier to communicate) could make for an interesting adjunct to the compelling NYX model -- and give Specialists something to do with their time.

Could Specialists create a subsription-based digest/newsletter/blog that summarized their thoughts and insights in the trading behavior of a stock they handle? Obviously, there are regs that need to be adhered to, but it seems that capturing this knowledge would be beneficial to NYX shareholders and its customers. And, beneficial to some large NYX stakeholders like LAB as it gives their diminishing-role Specialists a profitable outlet for their insight.

Just a thought to widen the mote and further align these quickly-growing obsolete professionals with the market center they've gotten to know better than anyone through the decades.

Thanks in advance (again). I'll take my answer off the air.

by Barry K on July 24, 2007 11:10 AM

JT -- Glad you like the Hybrid Market. And thanks for the suggestion on widening the Liquidity Replenishment Point ranges. I haven't heard any other calls for doing that (maybe I have the music turned up too loud) but we take all input into consideration.

Vlad -- Thanks for noting that. I haven't been tracking the dollars, but you're certainly correct that the revenue-sharing program has been extended through Aug. 31, 2007.

Ron (and Tony Dey, who posted a similar question previously) -- We're continuing to work on changing the specialist compensation model, modifying the rule on price stabilization (currently extended through Sept. 30, 2007), and making other changes to address volatility and strengthen the market.

Some of these changes -- such as compensation and stabilization -- take a lot of time to get right. We're looking to improve the market by encouraging specialists to add value and participate when appropriate; at the same time, we have to ensure that any changes are fair to other market participants. That's not an easy balancing act. Plus, our proposals are subject to the SEC's review.

You've seen Duncan Niederauer quoted in this space on what we hope to do, and the fact that it's Priority One here. I know you want these improvements to happen yesterday; so do we, and we're doing everything we can and then some to get them going.

I'm confident that we're going to get it done, and done right. I've seen my colleagues work through complex problems before, and that gives me faith. In the meantime, I'll continue to keep you posted on any progress I can share publicly. You can count on that, and I hope we can count on your public support -- or at least your review and comments -- when we make these proposals. I don't ask for that lightly, but as you've told me on numerous occasions, this is really, truly important.

Again, I thank everyone for writing, and for hanging in with the blog. Good talking with you.

by Ray Pellecchia on July 24, 2007 4:19 PM

Barry -- Terribly sorry for taking so long to get back to you. Will try to do better in the future.

1) We're working on a number of ways for issuers and investors to benefit from NYSE Euronext's global footprint. Currently, our listed companies can list on the world's most liquid markets in two major currency zones -- the dollar and the euro -- and get visibility before millions of investors across a 13-hour trading day. We can't comment specifically at this time on the issue you raise, but speaking generally, I can tell you that we're continuing to focus on ways for issuers and investors to gain greater access to the market.

I should also point out that companies today have the ability to list ordinary shares in both the U.S. and abroad. Canadian companies do this; so does NYSE Euronext. Most companies choose not to do so.

2) All of the NYSE ETF specialist firms are already acting as qualified lead market makers on NYSE Arca, supporting the NYSE Arca primary listed symbols. There are 33 ETFs that already are primary listed on NYSE Arca; there are 10+ firms qualified for the LMM pool.

The NYSE ETF specialist firms, as core liquidity providers, will continue to be selected by the issuer and provide continuous quoting and price discovery. Investors and issuers will not lose their value-added services, and specialist firms (which have always had separate ETF trading entities) have already embraced this model. BTW, NYSE floor brokers also will be participate in the trading of ETFs on NYSE Arca since they can trade from "beyond the blue line."

Sorry, at this time we have not quantified any cost changes associated with this move.

3) For NYSE-listed issues, we report our volume on an "NYSE Group" basis, that is, NYSE and NYSE Arca combined. So we consider NYSE-listed shares that trade on NYSE Arca as volume matched in NYSE Group markets.

Thanks for writing, Barry!

by Ray Pellecchia on August 6, 2007 8:26 AM