NYSE going 'Dark'

Big Board's New Dark-Pool Ammo: Sub-Penny Quotes

WASHINGTON—The Securities and Exchange Commission on Thursday approved a New York Stock Exchange initiative designed to help it compete better with the so-called dark pools that have taken business away from public exchanges.

The proposal, which aims to lure retail, or individual, investors with more-favorable prices, required the SEC to OK an exemption to market-regulation rules put in place during the past decade. The initiative is expected to be mimicked by other exchanges that have been waiting to see how regulators reacted to the Big Board parent NYSE Euronext's NYX -1.97% plan.

Under the 12-month pilot initiative, NYSE will become the first U.S. stock exchange allowed to offer retail investors stock quotes in increments of less than one penny. The change puts the exchange on competitive footing with a handful of banks and electronic-trading firms that already pay fees to retail brokers for the chance to fill their clients' stock orders.

In some cases, those firms execute trades at prices that beat the going market rate by fractions of a cent, something exchanges had been barred from doing since 2005. The ban was designed partly to eliminate potential confusion if the price "flickered," or moved too quickly to determine an appropriate price.

The program, which NYSE plans to launch in August, works along the same lines as dark pools that trade large blocks of shares for institutions. Dark pools are private platforms set up for anonymous stock trading.

NYSE contends that its program provides significantly more transparency than dark pools. Though it won't include the price or size of an order, each transaction will be signaled publicly. The exchange also will indicate which stock is involved in the trade and whether the transaction is a buy or sell order.

Joseph Mecane, NYSE Euronext executive vice president, said the program is an "attractive trade-execution alternative for individual investors."

"Providing price improvement for retail orders within an exchange environment affords individual investors new economic incentives and ensures greater transparency, liquidity and competition," he said.

Not everyone was pleased with the SEC's decision.

The SEC's decision is a "big step in the wrong direction," said Dennis Dick, a trader at Bright Trading LLC. "The whole market is going dark and there's no incentive to display liquidity."

Mr. Dick said his firm's traders have been shying away from posting orders on stock exchanges in the past few years because it has become harder to get the best execution on the exchanges, which he says are dominated by sophisticated computer-driven trading outfits. The NYSE's Retail Liquidity Program will make the situation worse, he says, because it will encourage retail investors to send their orders to the new trading pool in the hope of getting a better price.
—Jenny Strasburg and Scott Patterson contributed to this article.

http://online.wsj.com/article/SB10001424052702303684004577509110455072208.html?mod=googlenews_wsj

 

Does this mean I can post an order to my floor broker and post a passive buy order at 8.0111 or 8.0112 when the NBBO is 8.01 x 8.02? Or does this mean that when I'm on the wrong side of the market, they'll give me a consolation price of .0001 price improvement?

Market fragmentation in US equities is pretty absurd.

 

SOES BANDITS II

I always love a sequel.

 

If the NYSE passed it then it means it will only benefit their members....somehow it will never trickle down to the public.

 

we are asking for YEARS to do EXACT opposite-stop sub penny. stop sub penny for everyone. dark pools,ecn's-whatever.. yet they do EXACT opposite. even if we are allowed to place sub penny orders-we have no chance to compete with fuckers on other side,who can place 20000 place\submit cancel orders PER SECOND. i just don't fucking get it-why complicate things? BAN SUB PENNY ORDERS for everyone.

nothing is required to do that. NOTHING. one order from SEC. now,if we are allowed to use subpenny- then we should be allowed to see other sub penny orders ,right? no more 2 digits after decimal point? every broker have to modify their platform to do what? how much will be allowed? just curious... how many digits after decimal point's to display? 5?10?20? digits after decimal point? imagine this kind of mess in TWS
shiiiit..from bad to worse

 

Details on NYSE dark pool, and how it is bad for liquidity.

http://premarketinfo.com/2012/07/05/nyse-joins-the-dark-side/

 

http://sec.gov/rules/sro/nyse/2012/34-67347.pdf


Looks that only retail guys that send their order through a "retail member organization¨would be allowed to set their prices in 0.001 increments.

 

I read it as, anyone can send passive orders with sub-penny increments. RLP's have requirements to do so but, "Member organizations
other than RLPs would also be permitted, but not required, to submit Retail Price Improvement Orders." (As long as your broker gives you the capability to send that type of order. This might be tough for some systems to implement.)

Ordinary retail orders that take liquidity might also execute at sub-penny prices when they interact with these passive orders.

It will be interesting to see how this effects the best visible quote on NYSE.

 

it's gonna look like this-you place and order(any order via retail brokerage) and your order goes to exchange with very special identifier- 'L' (loser). so everyone else on other side will know it. did we asked for more transparency? here you have it.. more info ABOUT you to big boys on other side of your monitor..

 

My overall thoughts: The NYSE RLP program will probably not have much of an impact in the way of decreasing marketable retail order flow to the NBBO, as that flow is already diverted (OTC market makers internalize almost 100% of it currently). The program is simply a way for the NYSE to get a piece of the action.

The bigger problem I see here, is that this approval tells me that the SEC sees NO problem with the current market structure, and obviously has no intention of addressing the concerns that internalizers, via stepping in front of displayed liquidity by a fraction of a cent (sub-pennying), are discouraging displayed liquidity. I had hoped that the SEC might follow Canada's lead and make internalizers provide meaningful price improvement over the NBBO. This is obviously not the case.

Bottom line, there is no solution to our sub-pennying issues in the near future, so traders must learn to adapt to the new environment. That means taking more liquidity as opposed to providing it.