'NYSE Gives Floor a Credit to Provide Liquidity'

By: Ray Pellecchia

File Under: NYSE

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NYSE Gives Floor a Credit to Provide Liquidity (SecuritiesIndustryNews.com) Excerpt:

The NYSE Hybrid Market has begun offering floor brokers a credit for providing liquidity, a signal that it is inching closer to the maker-taker fee model prevalent among execution venues. However, the credit--NYSE's first for the floor--is unlikely to draw new liquidity.

The article's reasoning behind that thesis:

"The liquidity providers attracted to the higher rebates are typically electronic trading firms using sophisticated order-routing systems and algorithms to pursue statistical arbitration [I think they mean arbitrage]-type strategies.

Those systems, operating on extremely tight margins, send orders to venues offering best price with the most attractive rebate. However, notes richard Rosenblatt, CEO of New York-based Rosenblatt Securities, automated strategies can't be carried out via floor brokers using handheld devices. Consequently, the new rebate is unlikely to increase the volume of order brokers post.

Rosenblatt said he believes the credit confirms that NYSE management views the floor as a critical business component. "This is an indication that the exchange actually believes its rhetoric, because it's putting extra money in agents' pockets at a time when they sorely need it," he said, adding, "It backs up their repeated comments that they want agents on the floor creating unique value for customers."

I appreciate Rich's thoughtful comments. The credit, by itself, indeed is not a panacea; it is just one of a number of steps that we hope will add up to a significant, cumulative impact on floor brokers and their customers. Attracting liquidity surely is a matter of more than just addressing trading costs. Costs do matter, of course, but they do so in combination with the ability to provide such things as best price as well as value-added service and information. And of course, brokers need the electronic tools to deliver these goods to customers.

We want to weave together these components in such a way that customers recognize that they're missing something by not starting with the NYSE trading floor. I hope that others outside these four walls see the credit as Rich does -- not a silver bullet by itself, but tangible evidence that we mean to continue working to provide customers with ever-more-compelling reasons to come here.

Happy Wednesday, folks. Looking forward to seeing the Visa IPO list on NYSE this morning -- the biggest in U.S. history.

Speaking of history, a little trivia for you:

Today in NYSE History (NYSE.com) -- 19 Mar 1888: A rival stock exchange, the Consolidated Stock Exchange, was organized through the merger of several markets in mining and petroleum company shares.

Also On This Day (NYTimes.com) in 1918, Congress approved daylight-saving time (my favorite time of year); and in 1962, Bob Dylan released his self titled debut album.