SHARES Electronic trading structure creates more NYSE options
NYSE hopes to silence critics who say its trading system is too slow.
NEW YORK (AP) -- The New York Stock Exchange will revamp its structure to allow for greater electronic trading in a hybrid market, one that also includes the specialists who have executed trades since the NYSE's inception.
In a filing made Monday with the U.S. Securities and Exchange Commission, the NYSE said it wants to give stock traders the option to have their trades executed electronically, no matter the price or number of shares involved, while still providing the option for a floor-based auction run by specialists that the exchange says often results in price improvement for both parties.
"The hybrid market will strengthen the integrity and fairness of our market by marrying the best of electronic trading and the auction market in a way no other market can match," NYSE chief executive John Thain said at a press conference. The plan must be approved by the SEC.
The exchange hopes that an increase in the scope and availability of electronic trading will silence critics who contend that the NYSE's human auction model is too slow for modern markets. Human traders can still be involved in electronic trades, however, which Thain said will keep prices from becoming too volatile.
Thain said the specialists in charge of floor auctions would be fully in control of trading at the open and close of the session to keep prices from getting out of hand.
Currently, the NYSE's electronic trading system handles about 140 million shares per day, roughly 10 percent of all shares traded at the exchange. Thain did not know how many shares could potentially be involved in the increased electronic trading, but said the system would be ideal for high-volume stocks with little volatility.
The current system is limited, however, as it only allows trades of up to 1,099 shares, and traders must endure a 30-second delay between placing an order and having it executed -- which can cost thousands if prices are particularly volatile.
The proposed improvements would do away with those limitations, something that large firms like Fidelity Investments have been clamoring for. Thain admitted that competitive pressures from all-electronic markets such as the Nasdaq Stock Market were a factor in this upgrade.
"If we didn't respond to that customer base, they would pull their volume off of the exchange and trade in other electronic markets that give them that ability," Thain said.
Thain said the new electronic trading system would be ready from six to 12 months after SEC approval.