.jpg)
In a move to turn around its slipping market share lost to electronic rivals, the New York Stock Exchange announced last Friday, June 13 plans to overhaul more than two dozen rules that govern trading. The plan, outlined in regulatory filings, may make it easier for traders to bid or offer shares and lure more trades to the exchange, said NYSE vice- president Todd Abrahall. The NYSE Euronext unit hopes to introduce its "new model" for trading in Q3 2008.
TABB Group senior consultant Miranda Mizen (most recently senior vice president, transaction services at the Amex, where she was responsible for the functional development of the Exchange’s hybrid trading platform for equities and ETF’s), upon reviewing the regulatory findings writes: “Long-awaited changes to the New York Stock Exchange’s market structure have arrived in the form of a hefty rule filing that is expected to be fast tracked to implementation later this year. The filing – and its associated filings - contains a large amount of both major and minor changes to the specialist model, morphing specialists into designated market makers or DMMs, supplementing existing order types and introducing new dark liquidity functions for all participants. Although this is a major departure from the current model, the new market structure needs to be stacked up against other market models in terms of competitiveness and effectiveness. “
”First and foremost, the specialist model is being replaced by a DMM model. The label “specialist” will be consigned to history and the DMM model ostensibly paves the way for new entrants. These DMMs will have obligations to quote, incented by trading rewards and by the potential exclusion from future securities allocations if quoting thresholds are not met. The phasing out of the specialist per se is a welcome move and should please the antagonists of the model and is equally good for the Exchange which has had to support them. The DMM model is open to new applicants as well as the existing specialists, attracted by preferential trading opportunities, being the primary liquidity provider, the pricing of the opening, closing and intra-day imbalances, and security allocation.
For the complete commentary, please click here
