Changes to Specialist System?

Discussion in 'Wall St. News' started by listedguru, Dec 3, 2007.

  1. cstfx


    Wow, both sites offer free registrations to access the articles you can't access.

  2. I really don't like signing up for all that crap. I just figured someone here who was already registered could post them (LOL)...
  3. duffman


    Hi, 'Designated Market Makers'
    November 30, 2007; Page C14

    In recent years, the fortunes of "specialists," the elite traders on the floor of the New York Stock Exchange, have been declining. Now, Duncan Niederauer, soon to be chief executive of the Big Board's parent, hopes to banish the term altogether.

    In December, as part of sweeping changes to the role of floor traders in a world of electronic trading, Mr. Niederauer said he will propose replacing the century-old description of the auctioneers with what he calls "designated market makers."

    It has been a long road to get here. Since these traders emerged in the 1870s, specialists -- named because they each specialize in the trading of just a few stocks -- have amassed profits and critics alike for their privileged role in putting together buyers and sellers of NYSE stocks.

    In recent years, the handful of specialist firms remaining at the NYSE have encountered setbacks, including a $247 million regulatory settlement, declining profits and recent rules that make it harder for them to trade profitably while stabilizing short-term market volatility.

    Mr. Niederauer joined Big Board parent NYSE Euronext from Goldman Sachs Group Inc. in April, in part to fix the situation. His answer has been to propose an overhaul in the rules that apply to the way specialists trade NYSE-listed stocks. While many of the changes require Securities and Exchange Commission approval, Mr. Niederauer said he hopes they can be completed by early 2008.

    While he worked through the changes during hours of meeting with regulators and customers, Mr. Niederauer also moved forward with a plan to get rid of the old name. "This does feel like a pretty big change," Mr. Niederauer says. But as trading has gotten faster, it's "a direction that most people are going to want us to move in."

    The new-age NYSE traders will more closely resemble people who trade stocks listed on the rival Nasdaq Stock Market. They will still have a spot as the designated trader for each listed company, however, unlike Nasdaq traders, where numerous market makers simultaneously trade the same stock.

    Under the new model, specialists also will have fewer responsibilities because they no longer will have to refrain from trading in some circumstances.

    The cast of traders is changing, too. Lehman Brothers Holdings Inc. is expected to announce today or early next week that it will buy the NYSE specialist business of Van der Moolen Holding NV. That business lost about $16 million in the first nine months of 2007, prompting the Dutch company to leave the business.

    Lehman is paying $5 million to $10 million for the business and is expected to keep most of the unit's roughly 40 employees, according to a person familiar with the matter. The move, expected in mid-December, will follow next week's transfer of Susquehanna International Group LLP's NYSE stocks to Kellogg Specialist Group.

    Mr. Niederauer said two or three more changes are likely among trading firms in coming months.

    Firms looking to get in the business are counting on rule changes being approved that could allow NYSE traders to make more money. Some of the changes could bring opposition. One calls for the NYSE traders to be more integrated with the rest of their firms, something discouraged in the past because of concern that confidential information could leak between the exchange trading units and the firms' banking and off-exchange trading desks.

    NYSE said the separation unnecessarily restricts Wall Street firms such as Goldman Sachs, Bank of America Corp. and Bear Stearns Cos. from sharing people and technology with their NYSE trading units. Exchange officials add that other rules exist to prevent such information leakage
  4. It's the ONLY reason the NYSE exists... to "make more money".