Special testing for end of Daylight Savings; easier comp for system failures; collars being eliminated

By: Ray Pellecchia

File Under: NYSE

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Let me tell you a couple-three things, as they used to say on "The Sopranos." The first is new; the others, I'm playing catch-up on:

1) This weekend, the U.S. "falls back" from the current Daylight Savings Time. Because Daylight Savings Time this year began earlier and is lasting longer than in the past, this presents some challenges for those of you on the ops and tech sides. NYSE Group trading systems will be available this Sunday, 4 November, for firms that want to test in connection with this change. Advance registration is required by Wednesday, 1 November. Here's the notice that details all of this.

2) NYSE has amended Rule 18 to reduce the dollar amount required in order for a member firm to seek compensation in the event of an NYSE system failure. The minimum dollar amount is now $500, reduced from $5,000. Here's the memo on this. May you never have to put in for it.

3) NYSE is eliminating Rule 80A -- the index-arbitrage "collars" -- effective when the SEC posts this rule filing. Excerpt:

The Exchange is making this change since it does not appear that the approach to market volatility envisioned by the use of these “collars” is as meaningful today as when the Rule was formalized in the late 1980s. In the Exchange’s view, volatility is neither restrained nor enhanced by the imposition of the collars. It is as likely that markets will reverse trends whether or not Rule 80A is invoked. In addition, Rule 80A addresses only one type of trading strategy, namely index arbitrage, whereas the number and types of strategies have increased markedly in the last 20 years and may as well contribute to the increase in or lack of volatility.

Indeed, in approving the Exchange’s expansion of the collars to the 2% level in 1999, the Commission stated that “[i]t may make little sense to single out index arbitrage, which ensures that markets are aligned economically, from all other types of program trading.” As markets have continually and significantly evolved in the years since the original Rule was adopted, similar regulatory constraints on trading have been removed. For example, earlier this year, the Commission ended price tick restrictions on short sales by removing Rule 10a-1, a regulation adopted almost 70 years ago. In doing so, the Commission discussed the practice of applying different price tests to trading in different securities and markets. This is true in Rule 80A as well since its tick restrictions apply only to index arbitrage orders in S&P 500 component stocks.

Hope your week is off to a good start, my friends. And however your Monday is going, hopefully it's not as bad as...

...Today in NYSE History:
29 October 1929 -- "Black Tuesday" -- the most dramatic day of the 1929 Crash. The DJIA was off nearly 12 percent on volume of 16 million shares, a record that would stand for decades.