Weekend Trading on the NYSE Floor

By: twilemon

File Under: Options

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If you happened to be on the floor of the NYSE the last couple of Saturday mornings you would have heard something that sounded familiar. People were yelling for markets and others were yelling back quotes. But these were not equity quotes; these were option quotes. While the trading was only for testing and training purposes, the excitement was real. With the go-live date for NYSE Amex fast approaching, options trading is coming to the floor of the NYSE.

This is the biggest change for the Amex since they moved from trading on the curb to trading indoors. In the newly refurbished Blue Room (yes, the walls are painted blue, hence the name), NYSE Amex Options Traders and an incredibly dedicated Exchange team have been working through the kinks, getting their new place up and running for March 2 Go Live Day. On March 2, a new and exciting chapter in the history of NYSE, NYSE Amex and option trading in general will be written in the Blue Room.

Not only do the NYSE Amex guys and gals get new digs, they also get a brand-spanking-new trading system. NYSE Arca technology, so successful in driving the NYSE Arca Equities and NYSE Arca Options electronic platforms, in conjunction with the Liquidpoint Floor Broker trading system, will bring options trading on the NYSE Amex into the 21st century. We are in an electronic world. Listed options grew up being traded in an open-outcry environment. How do you meld the two? Electronic markets give speed and ease of access for market participants whether they are customers, firms or market-makers. Open outcry helps in price discovery, price improvement and added liquidity. The new Liquidpoint platform, linked with NYSE Amex trading engines, combines the two different trading approaches into a hybrid model that yields speed of transaction while also increasing liquidity and transparency.

On NYSE Amex, Customer is King. Customer orders have priority. They trade first. If a customer sends NYSE Amex an order and they are first to bid or offer at a certain price, they will be first to trade at that price. Being a customer on NYSE Amex has definite advantages.

Let me answer a couple of questions that you might have. Doesn’t NYSE Euronext already have an options exchange? Why have two? Yes we do: the NYSE Arca Options Floor in San Francisco is a hybrid exchange, also combining open-outcry trading with the NYSE Arca matching engines for electronic order flow. However, while NYSE Arca has a trading floor with market makers and brokers, the electronic trading market structure is modified price/time, and in the penny-pilot issues it's on a post/take pricing model. It pays people who add liquidity and depth to our markets while charging others who take an offer or hit a bid.

NYSE Amex runs an alternative exchange model where the customer has priority and trades are allocated on a pro-rata matching algorithm, with specialist and directed-order guarantees tied to quoting obligations. It is a hybrid system where orders can be either in an electronic environment -- letting our matching engines do the work -- or an open-outcry system for complex orders that need special handling by humans.

On the NYSE Amex, do customer orders ever have to pay? No. Customers ALWAYS trade free on NYSE Amex. On NYSE Arca, if the order adds liquidity, we still pay you to trade (pay to trade -- you have to like how that sounds). Of course if your order takes an offer or sells a posted bid, you get to pay for taking liquidity.

The addition of NYSE Amex brings tried and true technology that our clients love and joins it with an Exchange model that will appeal to a different set of clients, allowing us to offer you the widest possible array of trading algorithms, order types and pricing models.

With both models, NYSE aims to increase market depth and liquidity while cutting execution time and expense while using technology to give all market participants a level trading floor.

I encourage everyone to peruse the following links to better understand the myriad of different orders customers and traders can enter on NYSE Amex and NYSE Arca. With two different market structures, NYSE can satisfy the needs of all market participants.

One last quick note: who am I? I'm Todd Wilemon and I joined NYSE Euronext in January of 2009 after a 14-year career trading options. I started as a runner, moved my way up to crowd clerk, phone clerk, trade checker, floor broker, upstairs broker, floor market maker and upstairs trader. After all that, I still get excited walking on a trading floor. I am a radical for freedom and liberty. Free markets ensure and protect our liberty. That is why I am excited by where NYSE Euronext has been but more excited where we are going to take markets and trading in the future.

Trade ‘em up!

TW