Bumped in to this http://faculty.haas.berkeley.edu/hender/Hybrid.pdf A couple of things that stand out while I skim through it "Market and marketable limit orders are now automatically executed by default, rather than requiring a special code" "In Hybrid, the NYSE also introduced Liquidity Replenishment Points (LRPs), which are stock-speciﬁc price ranges intended to defend against erroneous trades and dampen volatility by converting the market from fast (automatic execution available) to ââauction onlyââ (auction mechanism, no automatic execution available) when prices move quickly in either direction. Immediately following Hybrid introduction, the market was fast 98.9%" "In addition to reducing execution time, the expansion of automatic execution reduces the opportunities for specialists and ﬂoor brokers to participate manually in executions. Another important set of changes in Hybrid gives the specialist and ﬂoor brokers ways to participate electronically that correspond to their prior trading capabilities: placing undisplayed as well as displayed orders on the limit order book. In addition, the specialist for each stock can use a proprietary algorithm to interact electronically with customer order ﬂow, subject to a set of rules intended to replicate in an electronic framework what the specialist is allowed to do manually in the auction market" "decline in the ﬂoorâs last-mover advantage should decrease the competition faced by limit order submitters, which would make them more patient." "t the Hybrid Market raises the cost of immediacy (the effective spread) by about 10%" ", but the move to faster electronic trading raises the cost of immediacy via adverse selection" Hasbrouck (1991a, b) introduces a Vector Autoregression (VAR) based model that makes almost no structural assumptions about the nature of information or order ﬂow, but instead infers the nature of information and trading from the observed sequence of prices and orders. In this framework, all stock price moves are assigned to one of two categories: They are either associated or unassociated with a recent trade. Although the model does not make any structural assumptions about the nature of information, we usually refer to price moves as private-information-based if they are associated with a recent trade. Price moves that are orthogonal to recent trade arrivals are sometimes considered to be based on public information [examples of this interpretation include Jones, Kaul, and Lipson (1994) and Barclay and Hendershott (2003)]. We construct a VAR with two equations to separate price moves into trade-related and trade-unrelated components. The ﬁrst equation describes the trade-by-trade evolution of the quote midpoint, while the second equation describes the persistence of order ﬂow. Deﬁne qj,t to be the buy-sell indicator for trade t in stock j (Ã¾1 for buys, 1 for sells), and deﬁne rj,t to be the log return based on the quote midpoint of stock j from trade t1 to trade t. The VAR picks up order ﬂow dependence out to 10 lags "We construct a VAR with two equations to separate price moves into trade-related and trade-unrelated components. The ﬁrst equation describes the trade-by-trade evolution of the quote midpoint, while the second equation describes the persistence of order ﬂow. Deﬁne qj,t to be the buy-sell indicator for trade t in stock j (Ã¾1 for buys, 1 for sells), and deﬁne rj,t to be the log return based on the quote midpoint of stock j from trade t1 to trade t. The VAR picks up order ﬂow dependence out to 10 lags" "Using a similar VAR, Hasbrouck (1993) decomposes price changes into their random walk (permanent price change) and transitory (pricing error) changes and calculates a lower bound on the pricing error. Because the pricing error has zero mean, its volatility is used to measure the magnitude of the pricing error. By using midquote prices/return in our VAR, we remove the effects of the increase in spreads and focus on the efﬁciency of quotes. Estimating the VAR on a daily basis occasionally results in large outliers (e.g., impulse responses that differ from the mean by more than 10 standard deviations). Therefore, we" Yes, ORTHOGONAL. It had to pop up !