Aphrodesiac for volatility; ETFs vs. NMS

By: Ray Pellecchia

File Under: ETFs / Indexes, NYSE

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Rule Change Ticks Off Some Traders (WSJ.com) -- "Another factor some traders say is causing turmoil: an arcane rule change -- referred to as the "downtick" rule -- that kicked into effect in July that makes it easier for investors to bet on stock-price declines. Before July, investors typically had to wait until a stock was actually rising to bet on its downfall."..."At the New York Stock Exchange, traders pointed to the downtick rule on July 26, when the Dow Jones Industrial Average sank 311.50 points, or 2.3%, to finish at 13473.57. But instead of complaining about the Federal Reserve, the housing market or hedge funds, one trader directed his ire at the fact that the 1930s rule was recently revoked. "Appeal the repeal," he said, walking across the floor with a handheld computer."

My nominee for quote of the day comes from the above piece: "On the New York Stock Exchange, Seaport Securities broker Theodore Weisberg agrees: "'They quietly changed the ground rules,'" says Mr. Weisberg. "'There's no question it's been an aphrodisiac for volatility.'"

I love colorful language, and "aphrodesiac" more than qualifies for colorful. If you have a nominee for quote of the day, I'd love to hear it.

ETF Providers Take Issue With Reg. NMS (CCHWallStreet.com) -- "Several ETF firms are asking the SEC for an exemption from one aspect of Regulation NMS...Now, with the rule mostly implemented, ETF firms riled up over the reg's order protection rule, which began operating as a pilot program last month. The rule requires that trading centers obtain the best possible price for a trade, regardless of the speed or convenience some large investors seek from trade-throughs." ... "The issue for ETFs is that they are actively traded portfolios of stocks, which results in constant price fluctuations. In order to conform to Reg. NMS, a broker-dealer needs to record the inter-market sweep orders for all securities, including ETFs. The speed of the trades within an ETF's portfolio means that by the time the broker-dealer sends that information out, the prices may have already moved, making the order meaningless. The order recorded may no longer be the best bid or even the best price. Also, by announcing their trades, brokers run the risk of exposing themselves to the market and opening up the possibility that another broker will come in and buy at a better price, said one industry official."

So Many Names, So Many Corrections (NYTimes.com) -- Two things are sacred, my first editor used to tell me: names and quotes. Names, in particular, mean so much to us, and they get misspelled so often. I'm reminded of this when my local paper massacres my daughter's name (first name and last get equal mistreatment), spoiling the special moment of being mentioned in a newspaper. In one instance, a reporter came to her classroom to interview her and other students, quoted her accurately, but somehow got her name wrong. "He was talking to me, why couldn't he ask me how to spell my name?" she asked me.

In the above article, New York Times Public Editor Clark Hoyt offers another reminder of how easy it is to get names right, and how often people get them wrong. How timely, in this age of anything-goes online misspellings. Even your humble blogger, in an effort to prevent typos and misspellings, has switched to accessing the Exchanges publishing platform via Mozilla Firefox instead of Microsoft Explorer, because Firefox flags misspelled words, while Explorer can't seem to manage that simple feat. It's a big help when you're writing fast. All writing boils down to getting it right -- if the spelling is bad, how good can the facts be? Spelling counts -- especially names.

Today in NYSE History-- 14 August, 2001: The first NYSE membership was retired under a program to reduce the number of seats from 1,375 to 1,366.

The number stayed at 1,366 until we went public in 2006.

Rockers born On This Day, mellow edition: Dash Crofts (67); and David Crosby (66).

Tags: New York Stock Exchange, Hybrid Market, NYSE, NYSE Euronext, NYX, trading, stock market; ETFs; Reg. NMS