Tuesday, August 03, 2004

NYSE to increase electronic trading

As the NY Times reported "Electronic Trading on Big Board upstages Terror Talk"

It has long been assumed that sooner or later the NYSE would become more electronic. Today the world's most famous stock market decided that there is no time like the present and announced that the NYSE would become more of a hybrid market with both electronic and floor trading.

As the NYSE press release states "The New York Stock Exchange is undertaking a significant upgrade in the utilization of technology to execute securities transactions. On Aug. 2, the NYSE filed with the SEC to expand the NYSE Direct+® system, which currently accounts for approximately 10 percent of trades executed. Limits will be eliminated on the size, timing, and types of orders that can currently be submitted via Direct+, and a number of other new features requested by our customers will be incorporated. At the same time, the NYSE will retain the advantages of the agency auction model, which has proven to provide the most efficient, lowest cost executions and the best ability to cope with market stress."

Thus the current limits on electronic trading are being removed which will allow more electronic trading, BUT the current system of a specialist and floor traders will still exist (especially when there are market imbalances and at the open and close).

Why is it being done? Again the NY Times "Institutional investors have long complained that they cannot trade with speed and anonymity at the exchange and as a result they have directed much of their trading to the Big Board's electronic competitors"

Looking for people who will not be happy with the change? Look no further than specialists and floor brokers. They will not be in favor of the change (especially in active, liquid stocks that are currently most affected by the constraints) as they will be losing more market share.

The press statement:
The NYSE's press releases and new conference
BTW Listen to the press conference--23 minutes and it is really interesting!

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