• May
  • 19
  • 2008
  • 2:57 PM

Another Reason to Use an NYSE Floor Broker: Don't Miss the Closing Price

By: Ray Pellecchia
File Under: NYSE

A guest post from my colleague Todd Abrahall about his observing the close in AIG on Tuesday, May 13:

As a result of an index re-weighting, the published order imbalances in AIG at the 3:40 p.m. and 3:50 p.m. imbalance publication times were 3.3 million and 3.1 million shares, respectively, both on the sell side. However, after 3:50 p.m., one firm put in a large offsetting order, and that -- coupled with other offsetting interest -- swung the imbalance to 4 million to buy at approximately 3:54 p.m.

Because we don't allow market-on-close interest on the same side of the last published imbalance, the only way to represent yourself on the sell side -- opposite that new imbalance on the buy side -- was to use a floor broker. Otherwise, you risk executing your order before the closing bell, or missing the market.

The result was about 20 floor brokers at the AIG post at the close, representing more than 3 million shares of sell interest. They each got an execution up a dime. The last print before 4 p.m. was $39.07; the closing print was 39.16, up 0.3 percent from the previous trade. The closing print was 12 million shares; the stock's average daily volume for the last quarter is 2.9 million shares.

Thanks, Todd. Sounds like a good example of a market that works, and of people on the trading floor adding value to customers. And thanks to our colleagues who helped us on this one by checking and adding details.

I'm going to try to post more guest blogs like this, as well as some Q&A interviews. What do you think?

Happy Monday, folks. Pete Townshend of The Who, the great songwriter and windmill guitarist, was born On This Day 63 years ago. The man who captured the moment when he wrote, "...Hope I die before I get old," is getting there. Old, that is. But he's still at it, and doing anything but mellowing, and I respect that. I recently caught on VH-1 a terrific documentary, "Amazing Journey: The Story of The Who," and came away with a greater appreciation for the band and its work. As the great man said, long live rock.

Comments

Dear sir,
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this is my P O BOX 5633 OSHODI LAGOS NIGERIA, Please kindly link me up with any STOCK BROKING FIRM.i will be very happy if my request is treat accondily.
I need the form all necessary document you think i may be needed thanks
ILEYEMI JIMOH AYINDE

by ILEYEMI JIMOH AYINDE on May 20, 2008 5:35 AM

Ileyemi -- I'm sorry, but as the stock exchange, we cannot recommend particular brokerage firms for you. I can only suggest that you either contact your broker there and ask for recommendations; speak with business associates or friends; or do some research via the Internet or a library to see which firms might suit your needs or interests.

by Ray Pellecchia on May 20, 2008 7:29 AM

Very interesting post Ray, it's nice to see examples like that of the auction process and from the floor in general. Would love seeing more.

I hope I can take the liberty of using this auction example to segue into a question about auction pricing. Is it different for Nyse-Arca vs Nyse? Specifically, I'm referencing this question you answered last year:

http://exchanges.nyse.com/archives/2007/10/opening-only.php

Current fees for NYSE are listed here:

http://www.nyse.com/pdfs/2008pricelist.pdf

Indeed closing auction is still priced at .0004 as you stated in your reply. However, the Nyse-Arca fee schedule doesn't specify this blended rate, but rather, in a bit of an obscure footnote at the bottom of page 1, it says that the fees don't apply. Nyse-Arca fee schedule can be found here:

http://www.nyse.com/pdfs/NYSEArca_Equities_Fees.pdf

Anyway, I think I'm confused because I'm used to referencing Nyse and Arca as the same company now, so it's a bit dissonant to understand that there might be different fee structures. Hopefully, you can clarify this for me.

Sorry for the long windedness. All the best.

-Marcus

by Marcus on May 23, 2008 5:16 PM

Marcus -- Thanks for the kind note. We're definitely looking to do more posts along these lines.

Sorry, I left for the weekend before seeing the note. Will have to check with someone and get back to you about the fees when I get back to the office on Tuesday. In the meantime, have a great weekend.

by Ray Pellecchia on May 23, 2008 6:50 PM

Marcus -- Sorry for my delay in getting back to you.

A colleague of mine advises: "NYSE and NYSE Arca indeed have different rate schedules. NYSE does charge a blended rate for Market-on-Close and Limit-on-Close orders on the close; Arca does not charge or rebate for the closing auction."

Hope that clarifies it. Thanks for writing, Marcus.

by Ray Pellecchia on May 29, 2008 9:28 AM

Hi Ray,
Could you help me understand who owns NYSE-listed stocks equity data (i.e., bid/ask prices, last trade, volume, etc). In light of BATS offering data for free, do you expect this to impact the 14% of revenue that NYX currently gets for selling this type of data?

As always, thanks for your insight.
Barry

by Barry on May 29, 2008 11:28 AM

Hi Ray, thanks very much for getting me that info. Much appreciated!

Best regards.

by Marcus on May 29, 2008 12:39 PM

Barry -- Last-sale data resulting from trades on exchanges, as well as quotes, are owned by the exchanges. We and the other exchanges publish that data on the Consolidated Tape. Bats appears to be making available last-sale data from only its own market, which is an ECN, not an exchange. This is not an apples-to-apples comparison. NYSE is the largest liquidity pool and therefore the primary, most reliable pricing authority for NYSE-listed issues. In contrast, Bats has a far smaller subset of trading in NYSE-listed stocks and thus offers a much less reliable indication of how our stocks are priced.

So there is a difference in quality, and that difference has a value. Look at it this way: I love to watch baseball. If I go to a Little League game, it's free. If I go to see my Yankees, I pay to do it. It's all baseball, but there's a difference in quality.

Please, no jokes about which league the Yankees properly belong in this year.

There is more to this issue. NYSE submitted a proposal to the SEC 18 months ago that would provide investors with free, real-time NYSE last-sale prices through Internet portals such as Google and Yahoo, on television tickers such as CNBC's, and through brokerage firm Web sites. That proposal is still pending. As we are the lead pricing mechanism for our listed issues, for us to continue to be prevented from offering our data on a free, real-time basis to the public, while others move forward with less valuable offerings, disadvantages investors, other organizations that would provide the data, and the NYSE. We urge the SEC to approve our proposal.

Our customers depend on us for robust, in-depth information from the leading price-discovery mechanism in our listed issues, and we believe they will continue to do so. Without question, we are constantly working to merit their business, by providing ever faster, richer information, as evidenced by our announcement of two new products earlier today (see: http://www.nyse.com/press/1212056349251.html ).

Thanks for writing, Barry.

by Ray Pellecchia on May 30, 2008 10:04 AM

Hey Ray, Hope you had a nice holiday weekend.

Any word on the LRPs, or just another "in one ear out the other" type thing that seems to be so prevalent at the exchange nowadays? And Tony, we might as well all together give up on the whole price improvement/liquidity idea...

Thanks,

jt

by jt on May 30, 2008 12:54 PM

JT -- Had a good holiday weekend, thanks, and hope you did too. Hope you did too. We have some really nice "small-town" parades in our town, and the Memorial Day parade is my favorite, because of the meaning of Memorial Day itself.

No news yet on the LRPs, but I know it's being discussed. Will let you know as soon as I hear.

On the price improvement and liquidity, I have heard of some things in the works that sound very good to my ears. Again, keep you posted.

In the meantime, thanks for writing and have a good weekend, JT.

by Ray Pellecchia on May 30, 2008 3:00 PM

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