• Oct
  • 17
  • 2008
  • 3:59 PM

Arca Targets Erroneous Trades; Amex Starts Transformation; and Why OTC Derivatives are OTC

By: Ray Pellecchia
File Under: NYSE, NYSE Arca

Three items that might merit your attention:

ARCA Targets 'Erroneous' Trades Problem (TradersMagazine.com) Excerpt:

NYSE Arca, in the wake of trading mishaps that caused the cancellations of thousands of trades on Sept. 19, is introducing a new service that could slow down trading and avoid a repeat of that disastrous day.
The unit of NYSE Euronext has started to incorporate its competitors' depth-of-book data into its own depth-of-book feed. That will allow it to route orders to more price levels than is required by Regulation NMS. ...
That Securities and Exchange Commission rule requires market centers to route unfilled orders to their competitors. But they only need to route to the markets' best prices.
Under the Arca initiative, the exchange will also route to the second-best, third-best, etc., prices. That will give the competing markets a chance to refresh their top-of-book prices, thereby preventing customers from executing at wildly different top-of-book prices.

So a fast market can be smart, or at least smarter? Sounds like a good idea.

Amex Begins Transformation (TradersMagazine.com) -- With the acquisiton by NYSE Euronext, the Amex is being rebranded and more importantly for traders, it's getting better trading technology and data transparency.

THE CRASH: Risk and Regulation: What Went Wrong (WashingtonPost.com) -- Nowhere else have I read such an account of how Washington years ago had (and missed) the chance to regulate the over-the-counter derivatives market.

Have a good weekend, friends. And the rest of you, too! :>)

Comments

Hi Ray -

Do you have more information on the NYSE Arca initiative, i.e. a NYSE press release? The Traders magazine article isn't very clear on the details of how this will be implemented.

by jw on October 17, 2008 5:45 PM

JW -- I'll try to get some more information about it. Thanks for asking.

by Ray Pellecchia on October 19, 2008 8:36 AM

Hey Ray,

A few Blog posts back you included in your response (Rebuttal) as to the Market Cap of NYSE Euronext being larger than the Market Cap of Nasdaq. Well here is a 10/20/08 update for you:
NYSE Euronext: 8.04 Billion Market Cap
Nasdaq OMX: 6.47 Billion Market Cap

In the Past:
NYSE Euronext: 29 Billion Market Cap
Nasdaq OMX: 10 Billion Market Cap

I see a trend, do you?.... Oh well, October 31st trick or treat? Time will tell...

by Mark T. on October 20, 2008 11:21 AM

Ray:

Thanks for the Washington Post article -- a good read. I'm a little surprised that Annette Nazareth would say that there was a "siege on regulation" during her tenure, given that she gave the world Reg NMS -- a substantial regulatory effort to micromanage trading without demonstrable benefit. I also remember SEC efforts to dictate governance standards for mutual funds, regulate hedge funds, and standardize exchange governance (the now-forgotten "Reg SRO" proposal), all of which went nowhere. Maybe the SEC should have spent more time and energy on real problems, as the article suggests. (The SEC's IG report on the SEC's failings with the CSE program is an interesting read: see http://www.sec.gov/about/oig/audit/2008/446-a.pdf .)

It would also be nice to hear one or two of the folks in the article -- each of whom shares some blame for how the OTC derivatives market became such an apparent wild west -- take some responsibility and admit a mistake or two, rather than suggesting they were pushed by "others" or expressing regrets for not taking some other action. Admit a mistake, suggest how those who come next can do better, and move on.

JS

by Jamie Selway on October 20, 2008 1:37 PM

NYSE Arca wil provide broker dealers with access to non-displayed orders, which will create better executions. We are looking at different ways to enhance the broker dealers' and their customers' experience. We'll have more details soon.

by Stephanie Scotto on October 20, 2008 2:02 PM

ray,

news on DMM at sec? or still anyday now?

by jt on October 21, 2008 10:18 AM

JT -- No news yet; I keep hearing "any day." I too am frustrated and impatient about this. I think these changes will be very positive for my readers, so I just can't wait. Will let you know the second I hear something new.

by Ray Pellecchia on October 21, 2008 10:53 AM

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