'Reg NMS Is a Winner, SEC Says'

By: Ray Pellecchia

File Under: NYSE

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Reg NMS Is a Winner, SEC Says (TradersMagazine.com) Excerpt:

According to an analysis conducted by SEC economists, key market metrics such as speed, width of spreads and depth have all improved since Reg NMS went into effect. On top of that, institutional trading costs, as measured by independent researchers, came down as well, according to a top SEC official.

"All the statistics run counter to the commonly heard impression that increased fragmentation since Reg NMS has led to reduced liquidity," Dan Gray, market structure counsel in the SEC's Division of Trading and Markets, said in a speech at this year's Security Traders Association of Chicago (STAC) conference. ...

The economists found execution speeds dropped, primarily for NYSE-listed securities. At the NYSE itself, the average speed for a market order fell from 12 seconds in April 2005 to two-tenths of a second in April 2007. They also found that spreads at the NYSE-both quoted and effective-narrowed by 10 percent.

Displayed depth increased substantially from April 2005 to April 2007, the SEC determined. For the Russell 1000 stocks, average consolidated depth at the inside quotes increased by more than 50 percent, according to Gray. "Promoting greater depth was one of the commission's major policy goals for NMS," Gray told STAC attendees.

As the article goes on to point out, traders have a very different point of view. Someone, please explain to me the reason why there's such a disconnect. Here's a quote from the same conference:

Cheryl Cargie, head trader at Ariel Capital Management, told STAC attendees that it was much harder to find liquidity "because the market is so fragmented." She added: "You can't go down to the floor anymore. You can't say Give me a look on this.' Where do I go? How do I do this? How do I tell the portfolio manager that I didn't get anything done?"