I could be wrong. But I remember trading nyse stocks pre hybrid and pre reg nms when the ecns still could trade through the ny quote. It didn't really matter because the majority of the volume would be printed in blocks on the exchange. People were given the choice of waiting for the ny print or getting a quicker fill on a ecn. And obviously since more volume was executed on the exchange than off, people chose to wait for the print. We also need to remember, even though the ecns could trade through, it really only happened in extreme circumstances. The problem is reg nms not giving that choice of speed vs price discovery.

by josh on October 17, 2007 2:40 PM

Ray: In terms of tracking volume, the folks at BATS have a web-based tool with near-real-time market share for exchanges and ECNs, as well as access to historical daily data. (See http://www.batstrading.com/market_volume.php.) The data indicates that flow is leaving the floor for electronic destinations, such as ARCA, Nasdaq, and BATS. "Dark pools" show up under internalization, and there's some evidence that they're growing. (Industry consulants love to "pump it up" -- to quote EC -- where dark pools are concerned. Don't believe all the hype.) Agree with Josh's observations on trade-throughs and problems with Reg NMS, which may be way the industry keeps getting the SEC to exempt it into practical non-existence.

by Jamie Selway on October 18, 2007 8:50 AM

Ray,

This kind of bugged me, "If you're depending on exceptional circumstances to make a trading model work, well, all I can say is, you're depending on exceptional circumstances to make a trading model work."

The first 8 years of trading for me wasn't an "exceptional circumstance." I make money when the market is tight and liquid. My problem with the hybrid has always been the fact that it is often illiquid, with small size on both the bid and ask.

My concern with volume leaving the NYSE is that this problem is only getting worse. If people are choosing to execute away from the NYSE then the NYSE has a problem, no?

Thanks, DT

by Dinosaur Trader on October 18, 2007 2:53 PM

Jamie,

That link isn't working for me...

-DT

by Dinosaur Trader on October 18, 2007 2:55 PM

Sorry, DT. I read too much into your posts on your blog about total volume being low. I get it now: naturally, you're focused on liquidity in individual stocks. Again, no offense intended.

by Ray Pellecchia on October 18, 2007 5:38 PM

Ray,

None taken, I just wanted to be clear. But I have to say, I took a quick glance to make sure I was still on your blogroll... :)

If the NYSE traded low volume each day but could manage size at the bids and offers and liquidity, I wouldn't care.

I think part of the issue is also with decimalization. When suddenly there were 100 spots for bids and offers to go it thinned liquidity at each price point. Add the speed of hybrid, and 10 quote changes per second and this explains the 1x1 bid and ask situation.

Anyway, thanks again.

-DT

by Dinosaur Trader on October 18, 2007 7:36 PM

It is obvious the NYSE is more concerned with winning over new volume. IE: Bond trading, foreign markets...

My belief is that the NYSE has waved the white flag in retaining volume for their listed securities. Where before NYSE would have about 60-80% of the volume on most securities, it is as low as 25-30% at this point. Lets all admit it, NYSE tossed the common day trader under the bus with full awareness of it happening, all the while talking out of the side of its mouth that "volume is at new levels."

If volume growth is 10fold over a set period, and NYSE volume has only doubled, I wouldn't be the proudest to stand on a soapbox about my accomplishment. Relatively speaking to all exchanges the NYSE is losing, and as traders who trusted them we have been failed.

by EarlyBirdsTango on October 19, 2007 12:07 PM

I agree with a lot of what has been said here. I am a little down about the NYSE right now also. The volume has basically dried up on average except on certain days but that hardly makes up for the overall lack of total volume. I am really confused cause i bought all the hype about the HYBRID and the NYSE commitment to its customers. At this point since the NYSE has lost so much market share why not just change a few things and make it more trader friendly? What do you have to lose? If the NYSE changed some things i really believe it would get the ball rolling again bringing in volume and revenue. Sorry to sound so negative Ray, but i am just at a loss right now as far as trading on the NYSE. Thanks.

by tony dey on October 20, 2007 11:35 AM

Josh and Jamie -- Thanks for the comments. I really appreciate your sharing your insights and perspective here.

EarlyBirdsTango and my friend Tony -- For the last few months we've been doing a lot of things to increase the level of price improvement, and we're continuing to work hard on that. Your notes remind me I want to write a roundup of what's changed, what's pending and what's ahead.

I also want to assure you that our NY market remains a priority for us. The diversification of our company into other areas makes us a stronger, more diversified company overall, with better resources to hone our competitiveness across the company. But it does not diminish one bit our focus on the NYSE marketplace; I know it first-hand.

by Ray Pellecchia on October 24, 2007 9:18 AM