Hi,

When is this new plan expected to be rolled out?jt

by jt on August 4, 2008 9:05 AM

Ray,

The traders in my office are excited about this. Anything to help provide more active liquidity instead of aberrant low volume fills is a welcome change.

Let's see how it works.

-DT

by Dinosaur Trader on August 4, 2008 10:26 AM

RAY,
Will their still be a display book at the post, that the DMM will trade from ? I know they will no longer receive an advanced electronic "look" at incoming orders, but what about orders that are on the book already.
thanks, Tom

by TOM on August 5, 2008 9:44 AM

JT -- The changes will be rolled out starting later this month through October. I'll be writing about them as they start coming down the pike.

DT -- I'm starting to pick up some excitement here, too. I appreciate your sharing that.

TOM -- Yes, absolutely, there still will be a Display Book that the DMM will work from at his/her post on the trading floor.

Thanks to all for writing!

by Ray Pellecchia on August 5, 2008 10:05 AM

Ray,

I'm trying to find some functional and technical info about the Direct+ platform/venue. Primarily in terms that would compare it to other order matching venues like BATS and Nasdaq.

I ask because we do a decent amount of stat arb (incl ARCA) but do not interact with Direct+, and hence might be missing significant liquidity relevant to our high frequency strategies.

Could you point me in the right direction?

Thanks!

by Sin Radovcic on August 5, 2008 11:27 AM

Sin -- A colleague advises:

"As a technical matter, Direct+ doesn't exist anymore; it's all just NYSE now. Any order that is marketable against the NYSE quote will auto-execute, regardless if it's marked NX or not. In addition, the order will sweep our book until it is completed, exhausts itself or hits a Liquidity Replenishment Point. If it is an Intermarket Sweep Order or Immediate or Cancel order, it will cancel the remainder upon completion; if not, the remainder will post."

All of this is laid out in our technical specsifications; they are all on this page:
http://www.nyse.com/content/publications/1043269645619.html

Is that what you need? If not, let me know. Thanks for writing.

by Ray Pellecchia on August 5, 2008 2:13 PM

Since the DMM will have parity, will he or she be able to place orders through an anonymous routing venue such as the ARCA Book?

by Jay Flore on August 6, 2008 4:38 PM

Jay --

My colleague Todd Abrahall advises that the DMMs will be able to place orders on other markets from their off-floor "upstairs" operation, but they won't have the benefit of parity in "away" markets, and they are economically incented to trade on NYSE.

Thanks for writing, Jay.

by Ray Pellecchia on August 6, 2008 6:09 PM

Hi Ray,
I am a shareholder from Singapore. This DMM thing is a little bit hard for me to understand. I'm just interested to know whether will this reverse the loss of market share to NASDAQ and BATS? Why doesn't NYX choose to go fully electronic just to make everything simple and easy for everyone?

Btw, NASDAQ said that they are now the world's largest exchange company, is this true?

THX

by icann on August 6, 2008 9:43 PM

This sounds like a positive change. We asked for the elimination of the specialist and you listened. Thank you!

by anomynous on August 6, 2008 10:27 PM

hey anon,

look at the way stocks traded pre-nms and look how how they trade now...(getting worse daily)
Like i have always said on this blog, if you are a fan of backing away, lrp's, and computer moving markets 2-3 points on 4-5 hundred shares, knock yourself out and i guess we'll just have to agree to disagree. The NYSE has wrecked the few things that made them unique, and in doing so, created a monster of a market that has been steadily losing market share to those they shouldnt have been competing with in the 1st place. jt

by jt on August 7, 2008 11:07 AM

Once in awhile i read a post so profound and to the point all i can say is "great post" Once again JT your on the money. Ray- will the new "DMM" step up to the plate and really fix the way the Hybrid trades? Thanks my friend.

by tony dey on August 7, 2008 4:49 PM

The Designated Market Maker will:
-- Be rewarded for quoting, which benefits other traders, the DMM, and NYSE as a whole;
-- Be obliged to maintain an orderly market in assigned stocks;
-- Not have an advance "look" at incoming order information;
-- Be required to quote at the national best bid or offer for specified percentages of the time;
-- Also be required to facilitate price discovery at the open, close and in periods of significant imbalances;
-- Provide liquidity based on a Capital Commitment Schedule that will be programmed into the Display Book but will receive no order information;
-- Have economic incentives that will be transparent and based on performance, which will be reviewed periodically;
-- Be able to trade on parity with other orders.

We believe all that will add up to a big "yes" to Tony's question. Thanks for writing, all.

by Ray Pellecchia on August 8, 2008 9:44 AM

Why not do a BLOG post about the negative occurances that are happening...losing market share to Nasdaq? Integration of acquisitions taking VERY long and less efficient? Nasdaq integration going faster than expected and cutting costs much faster? Much more competition in US and Europe? Expenses going up instead of down? Former CEO and CFO leaving? I can go on and on...It is GREAT to read all positive things, and of course thats your job, but it would be nice to read about negative things going on and EXACTLY what the NYSE Euronext is doing to solve these issues because right now Nasdaq is kicking our butt big time!!

by Mark T. on August 11, 2008 7:39 AM

Mark -- Over time, I've blogged about what we're doing on a number of those issues. But our main subjects here are the markets, products and services of NYSE Euronext. I don't cover the entire corporate landscape.

For a good look at where we stand on integration and cost control, as well as competitive issues, I would suggest checking out our most recent teleconference on earnings. The transcript is here, and the brief registration to hear the audio is here. Thanks for writing.

by Ray Pellecchia on August 11, 2008 9:18 AM

Hi Ray,

Do you have a list of the DMM's for each stock that trades on the NYSE?

thx

Trader

by Trader on August 15, 2008 8:32 AM

Trader -- The DMMs are not in effect yet; the proposal to establish them is still pending the SEC's review. In the meantime, we do sell a list of all listed issues and their specialist firms; here's the product page for it:
http://www.nyxdata.com/nysedata/default.aspx?tabid=745

Thanks for writing, Trader.

by Ray Pellecchia on August 15, 2008 9:25 AM

Your blog is interesting!

Keep up the good work!

by AlexM on August 17, 2008 7:49 AM

Great job with the blog Ray. My question deals with the closing price and imbalances. Currently I believe the specialist looks at all the orders and picks a closing price so when you place a MOC order you get that price. Are the DMM's going to pick a price to print at the close? Also, how does a firm become a DMM and what are the rules/advantages?
Thanks-

by filled on August 18, 2008 10:20 PM

Filled --

Yes, the Designated Market Maker will determine the closing price based on pending Limit on Close and Market on Close orders at that time, as the specialist does today.

On your other questions: A firm would need to apply to NYSE to become a DMM. The rules that govern the DMM's trading are pending the SEC's approval; here's the link. Regarding advantages, I don't think DMMs will have an advantage over other traders; I do think that some firms will look at how DMMs will work and determine that that's a business model they may find attractive.

Hope that answers your questions. Thanks for writing.

by Ray Pellecchia on August 19, 2008 4:03 PM

If the dmm does not have at least a small advantage over other traders, why would they add any value or depth to the market?

by josh on August 20, 2008 8:26 AM

Under the DMM system, will the LRP and auction process still remain? I.E., if a big order comes in that sweeps through an LRP, the system will kick over to a slow quote and the DMM will conduct an auction to resolve any remaining imbalance?

by Psycho Billy on September 18, 2008 10:27 AM