- Oct
- 30
- 2007
- 6:25 AM
NYSE Euronext, BIDS plan joint venture to enhance liquidity and execution quality for block trades
- By: Ray Pellecchia
- File Under: MatchPoint, NYSE
News release just out:
NYSE Euronext and BIDS Holdings, L.P. today announced their intention to form a joint venture designed to improve execution quality and access to liquidity in block trading. Once formed, the joint venture will be open to all New York Stock Exchange (NYSE) members and accessible through BIDS Trading, a registered alternative trading system (ATS), which will become an NYSE member. The joint venture will operate as a facility of the NYSE and be subject to regulatory oversight by NYSE Regulation.
NYSE Euronext and BIDS Holdings will each have a 50% ownership stake in the joint venture, whose formation is subject to approval by the U.S. Securities and Exchange Commission and certain corporate authorizations. In addition, NYSE Euronext will make an undisclosed investment in BIDS Holdings, becoming the newest investor in the company, and joining the current owners: Bank of America, Bear Stearns, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Knight Capital Group, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS.
"The joint venture is a timely response to customer needs and reflects our commitment to diversification and customer choice," said Duncan Niederauer, President and co-Chief Operating Officer of NYSE Euronext. "We look forward to working with BIDS Holdings and our key sell-side constituents, which represent half of NYSE-listed volume traded on the Exchange, to re-aggregate block liquidity. We believe that this innovative co-branded approach with BIDS Holdings will serve our clients and markets well by bringing block-size orders back into contact with active traders, algorithms, and retail flow."
I don't yet know anytthing more about it than that, but there's a press briefing on it today at 10 a.m. NY, and it will be Webcast. Details here. I'm intrigued by this idea of re-aggregating block liquidity in this block-fragmented world; sounds to me like a natural role for us.
UPDATE: Here's today's Wall Street Journal on the same subject: Shhh, NYSE Aims to Bring Back Blocks
More to come on this, I'm sure. In the meantime, a bit of historical trivia to start your day:
Today in NYSE History
30 Oct 1929 -- The show business newspaper, Variety, published its famous market-crash headline: "Wall Street Lays an Egg."
Comments
If I send a size order to my floor broker can he access BIDS?
Steve.
by steve on October 30, 2007 6:30 PM
With the new Block Trading venture with BIDS will the model compete with MatchPoint for volume? What are some of the differences between the two products?
Thank you.
by Scott Chevalier on October 31, 2007 7:18 AM
Also,
I am afraid this BIDS thing could doom the floor. our floor broker gets size orders now. it is very rare for him to be able to cross any executions as one print above 3,000 shares and instead we get 200 and 300 share executions. On the plus side he does a good job capturing price improvement but he's doing it off the screen at the post and very rarely crosses stock with another floor broker. I think the main reason people use a floor broker is to find undisplayed liquidity which unfortunately is very rarely there. This BIDS thing could be the end of any hope of finding real liquidity on the floor. Unfortunate, because I'm a big fan of it. I realize NYSE is a public company now and must seek ways to get more flow back, damn tradition.
Thanks for the forum Ray!
Steve.
by steve on October 31, 2007 10:31 AM
Ray: Smart move by the exchange. The world needs 40 dark pools like the Pope needs... you get the joke. NYSE is a logical, low-cost place to re-aggregate block-sized liquidity. Good luck and godspeed. JS
by Jamie Selway on October 31, 2007 4:21 PM
Thanks for the questions and comments, all! I'm working on getting a response to the questions. I'm just learning this stuff, too.
by Ray Pellecchia on November 1, 2007 6:17 AM
Exciting news about the NYSE/BIDS JV. This initiative is part of a broader non-displayed liquidity strategy by the NYSE. The key ingredient in all this is the importance of investor choice within the NYSE offering.
BIDS, MatchPoint, SmartPool, NYSE Arca, NYSE "classic" and Euronext are all about addressing the diverse needs of the global investor. And if you look carefully enough, you can see how each complements or enhances (not competes) with the others.
For example, MatchPoint is a point-in-time portfolio-based system. BIDS is a continuous, negotiated (order-driven) system. While both share a "non-displayed," utility theme, they address different fundamental needs for the investor. MatchPoint provides a passive, risk/cash management, benchmark price environment which aggregates multiple orders in time to form informationless block liquidity. BIDS provides a real-time, dynamic environment where order- handling flexibility and information control enhance finding a contraside block.
And NYSE Euronext has several more examples (and more to come!) with NYSE Arca, NYSE Classic and Euronext...investor choice in a centralized, exchange environment. Pretty powerful stuff....
by Jim Ross on November 1, 2007 10:26 AM
To Steve's specific question, I've confirmed that the plan indeed is for floor brokers to have access to this pool of liquidity.
Taking that together with my colleague Jim Ross's comment above, I find this all very interesting. Think about it: if you were to contact your floor broker today, he or she wouldn't have access to this liquidity. It's not in the book or on the floor (so it's not as if it's "going away" from the floor); currently this liquidity is fragmented among disparate dark pools.
If we can re-aggregate these blocks, floor brokers can tap that pool as one part of their job of sourcing liquidity for their customers. That would enable floor brokers to provide more -- not less -- value to customers.
by Ray Pellecchia on November 1, 2007 12:46 PM
Thanks Ray, That is good news! Change...I must learn to embrace it. Good on ya NYSE..Now where's my cheese?
Steve.
by steve on November 1, 2007 8:00 PM
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