They NYSE will be making new changes... Here is a 10 point <b>summary</b> breakdown of those changes from a NYSE Blog... Please pick one or more that you can <b>comment on, dissect and discuss</b> that will help better understand how these changes may make it easier or harder for all of us to trade profitably.<blockquote>1)<b> "The look" goes away.</b> Specialist algorithms will no longer get an exclusive, advance look at incoming orders. In connection with this and other changes in the specialist's role, going forward we're calling them designated market makers (DMMs). The role has evolved enough that a name change is justified. 2) Since they no longer have exclusive information, <b>DMMs will be able to trade on parity.</b> They will be no longer have to stand at the back of the line, which gave them no incentive to quote, improve prices and match orders. They will no longer be the agent for the Display Book. So they will be rewarded for quoting, which benefits other traders, the DMMs themselves, and New York Stock Exchange as a whole. 3) DMMs will have the <b>"affirmative obligation"</b> to maintain an orderly market in their stocks, quote at the national best bid or offer for specified percentages of the time, and facilitate price discovery at the open, close and in periods of significant imbalances. They will provide liquidity to the book based on a Capital Commitment Schedule that will be programmed into the Display Book but will receive no order information. 4) Eliminating the look means <b>reducing order latency</b>, because there will be one less stop for every order to make. Less demand on electronic message capacity, too. 5) <b>DMM economic incentives will be transparent</b> and based on performance, and their performance will be reviewed periodically. 6) The old, artificial barriers that no longer make sense in today's environment are coming down. <b>DMMs will be able to integrate their floor-based trading operations into a related member firm, subject to strict information barriers.</b> This will free up firms to make their talent and technology more mobile and multi-purposed across their upstairs and downstairs operations, and make the floor operations more cost-effective They will also have better access to upstairs capital and will be able to trade derivative securities on other markets for risk-management purposes. 7) <b>Floor brokers</b> will be perfectly positioned to provide their customers with access to the increased value and price discovery resulting from all of the above. 8) Apart from these particular filings, there are excellent changes happening for the <b>floor brokers, too. They will have access to an NYSE-approved algo provider that will give them the ability to match the speed of upstairs smart routers.</b> They will be able to use those algo's to peg orders and also execute trading strategies, including VWAP and convert and parity. Brokers also are getting a new service that helps them get blocks done. The new service enables them to electronically broadcast a stock symbol they're interested in, without giving anything else away; respond to pings from other brokers; and "subscribe" to symbols they want to keep an eye on for interest from others, just like RSS -- kind of like adding a new, electronic dimension to the floor conversation, helping them locate block-sized liquidity. 9) <b>Customers will get a new order type:</b> a reserve order that does not require that any portion of the order be displayed. The order will participate in automatic executions but will not be protected in manual executions, will not participate in the open or close, and the DMM will not have access to it. It's another choice for customers looking for that type of functionality. 10) The <b>changes are starting this August</b> and should take a month or two to implement - pending the SEC's approval. </blockquote>
1) "The look" goes away: So all this time, they've been getting a sneak peak at all the orders before it even executes? And what is the purpose of looking at these orders other than for malicious acts(ie jumping in front of the orders)? So when all this looking goes away, we will have faster trades at nyse and lesser manipulation. This should bode well for us if I am understanding this correctly...
</b></i> Eliminating the look (the specialists algo) should increase liquidity and the rate of trading... and return more liquidity to the floor of the NYSE... which is better than having more and more dark pools...
Edgehunter, I agree with your take on the situation. It sounds like these changes SHOULD help restore some much needed liquidity and price improvement to the nyse. I'm not happy about the darkpool stuff either. I mean if you have 10K to sell post it so I can grab those shares if I want. LONG LIVE THE NYSE -Guru
1)<b> "The look" goes away.</b> Specialist algorithms will no longer get an exclusive, advance look at incoming orders. In connection with this and other changes in the specialist's role, going forward we're calling them designated market makers (DMMs). The role has evolved enough that a name change is justified. That sound so sketchy... these specialist algos that have been seeing our orders all this time. I'm guessing the "sneak peak" they got allowed their computer to decide whether or not to provide liquidity to match our order or to cancel liquidity all together, based on whether or not it's advantageous to take the other side of our trade. Would anyone trust a "specialist algo?" 2) Since they no longer have exclusive information, <b>DMMs will be able to trade on parity.</b> They will be no longer have to stand at the back of the line, which gave them no incentive to quote, improve prices and match orders. They will no longer be the agent for the Display Book. So they will be rewarded for quoting, which benefits other traders, the DMMs themselves, and New York Stock Exchange as a whole. I think we've all seen this. Mr. floor broker sits there, showing 1000 shares on NYSE LI quote and showing nothing at that price in the open book, getting filled away, and you decide you'd like to buy alongside Mr. floor broker so you post a bid to the same price he's refreshing at, and you get priority. This made sense, and is in congruence with the policy other ecns have about giving displayed orders priority over reserve and hidden orders. As far as not being an agent for the display book, if someone can figure out what that means, please tell me. 3) DMMs will have the <b>"affirmative obligation"</b> to maintain an orderly market in their stocks, quote at the national best bid or offer for specified percentages of the time, and facilitate price discovery at the open, close and in periods of significant imbalances. They will provide liquidity to the book based on a Capital Commitment Schedule that will be programmed into the Display Book but will receive no order information. This one is good, I guess. While they'll only provide liquidity when it's to their advantage, the fact that they must maintain some liquidity at the NBBO will I'm sure in certain situations gives me more shares to swipe. "Specified percentages..." gee, that's kind of vague, .001% wouldn't mean much, 35% would be huge. WTF is a capital commitment schedule? 4) Eliminating the look means <b>reducing order latency</b>, because there will be one less stop for every order to make. Less demand on electronic message capacity, too. Hopefully this will make NYSE feel "instant" the way other ecns do, vs. the "almost instant" that it feels like now. 5) <b>DMM economic incentives will be transparent</b> and based on performance, and their performance will be reviewed periodically. Good, so the specialists will be counting their cash and if they're providing liquidity at really stupid times they will lose their jobs. OK. Moving on... 6) The old, artificial barriers that no longer make sense in today's environment are coming down. DMMs will be able to integrate their floor-based trading operations into a related member firm, subject to strict information barriers. This will free up firms to make their talent and technology more mobile and multi-purposed across their upstairs and downstairs operations, and make the floor operations more cost-effective They will also have better access to upstairs capital and will be able to trade derivative securities on other markets for risk-management purposes. O.K. 7) <b>Floor brokers</b> will be perfectly positioned to provide their customers with access to the increased value and price discovery resulting from all of the above. "If making the NYSE faster by a few milliseconds brings to it more liquidity which was previously residing on darkpools and other venues, the floor brokers will be able to trade with that liquidity, by virtue of being on the floor." ---- Worthless statement. 8) Apart from these particular filings, there are excellent changes happening for the <b>floor brokers, too. They will have access to an NYSE-approved algo provider that will give them the ability to match the speed of upstairs smart routers.</b> They will be able to use those algo's to peg orders and also execute trading strategies, including VWAP and convert and parity. Brokers also are getting a new service that helps them get blocks done. The new service enables them to electronically broadcast a stock symbol they're interested in, without giving anything else away; respond to pings from other brokers; and "subscribe" to symbols they want to keep an eye on for interest from others, just like RSS -- kind of like adding a new, electronic dimension to the floor conversation, helping them locate block-sized liquidity. They'll have access to NYSE smart routers... so you won't see them cross up on NYS and miss a fuckton of ecn black box liquidity that was previously canceling on them. These pegs sound like a lot of fun... like the modern version of the stepping bid/stepping offer... when I catch those pegs I'll be swiping the book until I find their limit and dumping my shares into them once I do. "Subscribing to a stock" - so they now have price alerts and can program triggers that bring their attention to a stock. Welcome to 2000. 9) <b>Customers will get a new order type:</b> a reserve order that does not require that any portion of the order be displayed. The order will participate in automatic executions but will not be protected in manual executions, will not participate in the open or close, and the DMM will not have access to it. It's another choice for customers looking for that type of functionality. A lot of the time in thin stocks I post my orders to NYSE because if there's a wide spread and I go on the inside market, showing a 100 ARCA that's the best bid causes boxes to jump in front of me and sets off a whole chain reaction, all because they have been programmed to "fear" the reserve capabilities... but when I post a few hundred only on NYSE, the boxes are much more lenient in regards to not trying to penny me to get a fill. How much this will change will be interesting. The smart boxes that compete for a lot of wide spread panic fills, which you can watch all day jump up and down the bid and offer and then cancel once price gets too high, will now be posting hidden. 10) The <b>changes are starting this August</b> and should take a month or two to implement - pending the SEC's approval. </blockquote> Nothing to comment on this one.
well all i care about is we are finally getting access to reserve orders!!! outside of that we will only find out how the changes work after watching how the market trades. they don't sound too major to me but if it results in more LRPs getting hit then i am all for it!
I am gonna try and find some time this weekend to go to the NYSE site and see if there is some more info to study. However, just quickly reading through this thread it sounds to me like the Specialist is just going to turn into one big hybrid MM/ECN(ala NASDAQ). It doesn't suprise me, and I think once they finally negotiate something out with the specialist firms, the Specialist will be history and be replaced by ARCA like they have already done on a bunch of ETFs. I think this has always been the master plan since the ARCA merger/takeover. If you trade any of the aforementioned ETFs on an intra-day basis, you'll know that the elimination of the Specialist has not been advantagous to scalping.
The elimination of the specialist means everything will be electronic like on Nasdaq. The really screwed up thing is the dark pools, because you could be buying while huge blocks are being sold behind the scenes, and when it's reported the stock just craters on no volume. Ridiculous imo.
I am hoping that some of these changes will bring back more order flow to the NYSE and cut down on the growth of dark pools...