New incentives for specialists to quote at best price, provide price and size improvement, match better away prices

By: Ray Pellecchia

File Under: NYSE

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I'm taking a quick break from vacation (I know, that doesn't exactly make sense) to share some important news: starting in September, NYSE will switch to a new program for compensating specialists -- a more-competitive model that will provide specialists with incentive to:
-- quote significant liquidity at the best price;
-- provide price improvement;
-- provide size improvement;
-- provide liquidity by posting bids or offers on the book; and
-- match better bids or offers published by other markets to reduce client routing costs.

These are exactly the kinds of things many of you have been calling for in your comments to the Exchanges blog. Thanks again for sharing your opinions and trading experiences. We're listening.

The new program is detailed in this rule filing, which technically is immediately effective today upon its filing with the SEC; we'll implement the new model at the start of September. You might recall Duncan Niederauer telling analysts on 2 August that a new specialist-compensation program would be in place in September, which was seen as an aggressive timetable. Now he and the team working on this issue have delivered on the promise, on time.

Now let's keep it going. That is, it's important to note this is one of a series of steps we're taking to strengthen the competitiveness and quality of our market. A key step, indeed, but there's more to come on this front. Watch this space.

Talk to you when I get back in September, unless another significant event intervenes.

One little aside, from the Alphabet Soup Watch department, for those of you who haven't been getting your daily fill of Exchanges blog nonsense: the filing refers to a new LPP (Liquidity Provision Payment), as distinct from our old fave, LRP (Liquidity Replenishment Point). A quick Google search reveals we're not all alone on having an LPP:

-- The Livestock Production Programme was a U.K. project that funded, managed and promoted research aimed at improving people's livelihoods through livestock.

-- Lisp Plus Plus is a library of Lisp-like functions and macros usable in C++ programs. Whatever that means.

-- License Program Product is an AIX terminology referring to a complete software product collection including one or more packages and filesets. Again, whatever that means.

-- Library Philosophy and Practice is a peer-reviewed electronic journal that publishes articles exploring the connection between library practice and the philosophy and theory behind it.

That's not to mention Labor Party Pakistan; Lean, Premixed, Prevaporized combustion; Linux Progress Patch; Lipoma Preferred Partner; Laboratory of Particle Physics; League for Pastoral Peoples... I could go on. But I think I already have.

Tags: New York Stock Exchange, Hybrid Market, NYSE, trading, stock market, Duncan Niederauer, specialists, SEC