• Oct
  • 23
  • 2007
  • 1:00 PM

Readers discuss automating NYSE openings

By: Ray Pellecchia
File Under: NYSE

Two readers responded to 'NYSE Seeks Faster Trading by Opening Some Stocks Automatically':

IMO, You are laying the groundwork for your own demise. Bad idea.

by tony dey on October 5, 2007 7:18 PM

Ray: Good start, but obviously much more to do to improve NYSE opens and closes. Any timing on when you'll have indicating prices and imbalance information in real-time? Thanks. JS

by Jamie Selway on October 12, 2007 4:30 PM

Tony -- As always, I appreciate your viewpoint. I respectfully disagree on this one.

The key to avoiding our own demise is positioning people to be able to use their judgment and interaction when they can be of value, and the only way to do that at the opening is to free up specialists from rote tasks. Automating some of the openings lets the computers do the grunt work and allows specialists to do the value-added.

I wish I had an API to do the grunt part of posting links to the blog, which involves rather tedious cutting and pasting, and inserting bits of code. That would save me a few minutes I could put toward researching or writing something useful.

Or taking a quick nap.

I think this initiative is proving to be a help to the floor -- as well as the customer -- not a hindrance. If anyone from the floor wants to weigh in on that, the comment box below is all yours. Thanks for writing, Tony.

Jamie -- My colleagues tell me that pre-opening indications are expected to go live in the November-December time frame. Will pass along a more specific date as soon as we get through final quality assurance.

I don't have as clear a picture on real-time imbalances, but making these available is a priority for us, and I'll pass along any updates as I get them.

Two other updates that might be of interest along these lines:

1) By the end of October, all depth-of-market S-Quotes from the specialist -- previously not published to NYSE OpenBook -- will be reflected in OpenBook; and

2) Also by the end of this month, all listed securities will be capable of being opened automatically with use of the specialists' API if they can open on a quote, as discussed above. And as we've said, specialists will continue to be able to "physically" handle the more challenging openings, while leaving the more routine ones to the machines.

Thanks for writing, Jamie! Again, will keep you posted as these things progress.

Today in NYSE History
23 Oct 1868 -- The NYSE made membership a saleable property right. A seat on the Exchange was worth about $8,000 in 1868.

Comments

I wrote the specifications for this "automated opening." It is not "laying the groundwork" for the demise of the NYSE. The intent is to automate something for which the human Specialist adds no value - opening a stock on a quote.

For many stocks, at 9:30am there is no locking/crossing interest. In those cases, the symbol just opens with the natural interest quoted at the spread prices. The Specialist does nothing more than push a button to publish that quote.

The "automated" feature was intended to allow the Specialist algorithmic systems the ability to "push" that button and publish the quote.

This frees up the Specialist to better use their judgment to figure out the very best prices at which to open the stocks for which there is locking/crossing interest.

by Daniel Flax on October 23, 2007 5:29 PM

I apologize if i got it wrong at all. I am just tired of what seems like everything being done to minimize the input of the specialists. It has always seemed to me that the stocks have traded much better when the specialists are MORE involved and not less. Thanks Ray.

by tony dey on October 23, 2007 6:28 PM

Ray, any word on the progress of specialist incentives ....price matching and added liquidity? I thought they were supposed to come into effect in September.

by Ron on October 23, 2007 9:15 PM

Maybe this is a dumb question. Why can't you just do it like nasdaq and send out all of the imbalance information as it updates and not have a human being involved at all?

by Josh on October 24, 2007 10:44 AM

I disagree with josh,
it should be the goal of the nyse to keep a human involved in every area of trading possible. It is vital to keep up the integrity of the exchange. Less human involvement = less opportunity for all.

by josh on October 24, 2007 2:53 PM

Daniel -

Thanks for weighing here. This forum is great and highlights NYX's desire to keep things transparent and in the open.

Rather than write programs for automated openings, why not use what's already been written, proven effective, and that NYSE already owns -- ArcaEx?

ArcaEx opens ETFs -- not specialists, and the imbalances seen in those issues can be significant. Yet when ETFs migrate to NYX from Amex, etc. they move to ArcaEx -- not the Old Board.

This seems reminiscent of AOL keeping its subscriber model for years while the market dictated a shift in strategy. Ultimately AOL acquiesced, and they ditched their money-losing, steeped in tradition, model.

Could you please elaborate on why NYX tries to maintain a system that the market has dictated a shift in?

Could you help us understand why ArcaEx isn't being used for opening stocks? Are there key differences between what you've written and ArcaEx? If so, could you please highlight some of the advantages that the system that you wrote the specs for have?

Thanks in advance for your insight. Also, thank you again for writing on this blog. Ray, as always, thanks for facilitating this valuable exchange.

by Barry K on October 24, 2007 2:59 PM

Josh on October 24, 2007 10:44 AM --

A colleague advises: we will be moving to that model in the near future with the implementation of our new architecture in 2008. In the meantime we would like to make sure that all imbalances include floor- related orders too.

Thanks for the question, Josh!

by Ray Pellecchia on October 24, 2007 4:13 PM

Ray,Be careful what you wish for.When I was a specialist clerk in the early '80's we wished for a way to have the grunt work (rewriting "bibles", pages of orders, etc.) taken care of so we could get out of work before 9p.m.Now the need for people and consequently their jobs are nearly gone.People are "retiring" left and right down there and I fear in a few years the NYSE will be another glitzy NY apartment building.This "hybrid" is quickly leading to full automation and anyone who works on the NYSE knows this.I wish you luck and job security.

by Ali on October 26, 2007 10:34 AM

I feel the same way Ali. Maybe i jumped the gun with my post but its very obvious where the NYSE is heading no matter what is being said. I would feel alot better if i saw some real increase in specialist participation in the form of price improvement & matching. Your customers dont want another NASDAQ, we want a TRUE Hybrid with liquidity, depth of market, and stability which only seems to come with MORE specialist involvement. Its a shame because with a few minor changes the NYSE would really see a huge improvement in thier overall market quality and once again become the best place to trade. Thanks

by tony dey on October 28, 2007 10:46 AM

Ray,

The NY Post asked this weekend ifthe Hybrid Market is going to be shuttered?

What say you?

-DT

by Dinosaur Trader on October 29, 2007 9:00 AM

Had to post Ken Jackson's (Columbia professor, and author of the Encyclopedia of New York) insight about progress.

Even if you disagree with this idea, it's still interesting food for thought. 'Specially in the context of evolving the capital market structure on Earth.

As Professor Jackson states, "New York is North America's oldest city." While there are in fact older settlements, New York is the oldest continuously occupied city. Yet we do not think of "history" when we think of New York. That is because, in some sense, "history is for losers," meaning that only when a place has passed its prime does it begin to be concerned with its past. Because New York's identity is caught up in notions of success, mobility, and progress, it is easy to lose sight of the city's historical significance."
(Source:
http://caho-test.cc.columbia.edu/sim/15101.html)

by Barry on October 29, 2007 9:55 AM

Ray, There was an article in the NYPOST yesterday saying that the "Hybrid" has been a huge failure and is close to be shut down. Can you please inform us about whats going on. thanks.

by tony dey on October 29, 2007 11:38 AM

Re the New York Post article, it's wrong to say we're looking to close the NYSE Hybrid Market. We're busy enhancing it, not planning to shut it down.

by Ray Pellecchia on October 29, 2007 2:35 PM

Ray,

Well, it is the Post... they don't make anything up. Why would they report something that wasn't true? :)

-DT

by Dinosaur Trader on October 29, 2007 5:14 PM

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