ray hi,

how come SDOT doesnt rebate for adding liquidity like some of the other exchanges (ARCA ISLD, BATS etc)??

Thanks A lot

jt

by jt on February 21, 2008 3:30 PM

sorry to write twice , but just thought of this... if liquidity rebates were offered by DOT, do you think it would inspire more traders/customers to send orders over DOT as opposed to another venue? I know i would, Often i will take liquidity on DOT and offer out on ARCA/ISLD simply for the rebate ARCA/ISLD offers...?

ty

by jt on February 21, 2008 3:34 PM

Thanks for the suggestion, JT. I'll forward it to the powers that be. I know that traders have different reasons why they send orders to one venue vs. another, and I appreciate hearing your perspective. Whether we follow your recommendation or not, I consider the input valuable and appreciate your writing in.

by Ray Pellecchia on February 21, 2008 7:38 PM

i respectfully have to disagree with jt. in my opinion, it is imperative for the nyse (dot) to not just completely become another ecn. liquidity trading has had a negative effect on the quality of the markets in general and i truly hope that the nyse does not add to that problem. any active trader will tell you that a lot of the computer programs that seem to be running the show nowadays are liquidity programs. these programs are terrible for the market. they create silly moves on minimal volume, even in high volume stocks. bids and offers disappear in the blink of an eye because these programs do not want to remove liquidity and will move the stocks in such a way to induce traders into removing liquidity from them. NYSE needs to make themselves the premiere place to trade stocks. becoming like every other ecn is not the way.
thanks,

by josh on February 21, 2008 10:14 PM

Josh -- Thanks for the comment, which I will pass along as well.

by Ray Pellecchia on February 22, 2008 4:56 AM

I agree with Josh on this. The liquidity programs have been a big negative. Maybe reduce the rates to attract more volume. Thanks ray.

by tony dey on February 22, 2008 8:25 AM

josh, i agree with you as well, algo's do in fact seem to be a frustrating facet of the market. However, my recommendation is more of a "if you can't beat 'em, join 'em" I figure there is a slight opportunity cost to the 10s of 1000s of shares i trade on DOT everyday w/o a rebate. We have to compete with the algo's on every other mkt,so why not get a little extra incentive to do so when your offer is lifted...

by jt on February 22, 2008 8:29 AM

one last thought on this topic. if they were to add a rebate on sdot, all that would mean is that they would also have to increase their removal fee as well. i would much rather have no rebate on dot and still have a venue i can take liquidity from that does not charge me a small fortune. JT, i still think its not to late for the nyse to correct some of the mistakes they have made over the past years. that is why i am not a the point of just saying "if you can't beat em join em" but i can understand your frustration. i know that markets change and that technology has changed trading forever. my hope is still that those people who make these huge decision that affect the lives and careers of thousands of people (sec, nyse execs) understand that trading has and always should be controlled by people and not just computer algo's. bring back human intervention and watch the volume and quality of the market explode.

thanks,

by josh on February 22, 2008 2:54 PM

Wow, always people commenting here are crying about losing to programs.

There is a name for you, and it's a luddite.

The nerds will inherit the earth.

by Ian on February 25, 2008 1:05 PM

Interesting discussion on this blog, and IAN has a point. NYSE became an also ran before it merged w/AX. AX was NYSE's only hope to stay relevant and to step into the post-nms world. Without AX, NYSE would've become a ghost town with a barber shop and a lunch club for its geriatric members.

Thain decided getting into europe should take management's attention and energy and devoted many resources to that project...Then he misguided the Street w/his ambitious hopes for money saving synergies (set up Duncan's realistic disclosure which disappointed the Street to the tune of over $5 billion in market cap loss in a few short weeks).

Meantime, much like manure cleaners in NYC protested the advent of automobiles, the architects of Hybrid are scrambling to stay relevant. Why NYSE doesn't just scrap Hybrid and move things to the Arca platform is baffling. Duncan said in his 1st presentation as CEO that he envisions one gateway into the house that is the NYSE...Would that gateway be a system designed by the old nyse engineers, or would it be ArcaEx -- a proven and powerful engine for trading.

If the floor is such an important part of the brand, it's probably high time to bring in mckensey to figure out a marketing approach to transform this brand -- which is quickly becoming negative equity. Part of the NY Times brand was once having only black and white pics (the grey goose)...they eventually got with the times and added color (though their stock chart looks like a Viagra hangover)...

Hearing the trading community complain about NYSE's trade quality is hearing it from the horse mouth. The proof is in the pudd'n, and it clearly looks like nyse is losing market share in big chunks to faster exchanges. All the political rhetoric about humans helping maintain order is quickly sounding like hogwash -- have our markets been orderly lately?

Ray, is there any more news about the SEC's addressing the rule changes that Duncan indicated would be forthcoming towards the end of last year?

Thanks.

by Fonzerella on February 26, 2008 8:52 AM

Fonzerella -- We've already seen some of the incremental changes in the rules, and I expect we'll have news on some of the more fundamental, far-reaching changes in the next few weeks.

I don't agree with many of the other comments you make here, but you're entitled to your view, and I know it's up to us to prove you wrong by executing in the coming weeks and months.

I will say this, which is what Duncan and Larry have been saying: we are not looking to become another ECN. Our customers have told us they don't want that, and we believe there is a place for a differentiated model. Now, it's up to us to deliver on that. I believe we're going to surprise a lot of people. Until then, thanks for reading, and for writing.

by Ray Pellecchia on February 26, 2008 10:15 PM

Ray -
Thanks for your feeback. Different opinions is what makes markets...

Two more things:
1) Arca was not just an ECN -- it was an actual stock exchange. The first ECN to also be a stock exchange if memory serves.
2) Actions speak louder than words, and NYSE's customers are routing orders to ECNs and other exchanges. So, politically, they may say they don't want another ECN, but don't their actions speak louder?

When Duncan and Larry say that your customers don't want another ECN are they referring to your customers that are listed companies or to your customers that trade on your exchange? NYSE has different customer bases and it sounds like one set of customers wants better trade quality while another wants to preserve the status of being NYSE listed. Is that a fair assessment? How do you reconcile which customer base should take priority? Listings at $500k/year are probably more profitable than trading customers (is that so?). Listing on Arca brings is less revenue for NYSE so management may be incented to preserve the more expensive venue.

I don't mean to sound abrasive or argumentative, I just really appreciate your opinion and insight. Thank you again for your time, and this great medium for exchange.

by Fonzerella on February 27, 2008 9:10 AM

Fonzerella --

I totally agree, it takes two points of view (and often more) to make a market.

And you're correct, Arca had already gone from ECN to Exchange when we merged with them. I didn't mean to disparage ECNs (or to your point, all-electronic exchanges) with my comment; rather I just wanted to say that we want to differentiate ourselves.

And you're right, customers tell you more by voting with their feet than by talking. Two thoughts on that:

1) I attribute part of our market-share loss to date to a more competitive environment under Reg. NMS and sharper competitiveness from certain other markets. I also think that the decline in price improvement hasn't helped our cause; it diminished a factor that helped set us apart. Simply put, we still have the largest piece of our pie, but we have to increase our competitiveness to maintain and grow it.

2) The fact that our share of trading has stabilized recently makes me wonder if we've stemmed the tide and from here on out we have a chance to reverse it. I think it's too early to conclude that, but I do wonder, and hope that the changes we are planning will kick some butt.

You're also correct that we have multiple groups of customers, but it was indeed traders that Duncan and Larry have been talking to and referring to on this, though I know we're constantly talking with listed and other clients as well.

And of course you're right about the proof being in the pudding. I think this is going to be an interesting year on that front -- a lot of change ahead. Looking forward to continuing to talk with you and everybody else here about it. Thanks for writing!

by Ray Pellecchia on February 27, 2008 8:16 PM

dear ray with the new rule changes will increase spec participation happen.WHAT MADE THE NYSE the best place to trade were our deep MKTS.

by duke on March 1, 2008 11:49 AM

Duke -- My understanding is that we'll see that rule filing within a few weeks. The SEC then will post it for comment before voting on it. I know you wish it were happening yesterday already; me too. Will keep you posted every step of the way. Thanks for writing.

by Ray Pellecchia on March 1, 2008 1:22 PM