-- SEC Approves New Rule Set and Trading Tools Designed to Benefit NYSE Listed Companies and Traders --
NYSE Aims to Maximize Market Quality and Competitiveness With Newly Approved Enhancements of Trading Model
NEW YORK , Oct. 24, 2008 – The New York Stock Exchange, a subsidiary of NYSE Euronext (NYX), is moving forward with a revised rule set and advanced trading tools designed to maximize the NYSE’s market quality and competitiveness in today’s increasingly electronic trading environment. The initiatives further distinguish the NYSE from competitors and provide greater value to customers by enhancing the Exchange’s unique market model with new benefits and functionality.
The Securities and Exchange Commission (SEC ) today approved two key initiatives to provide NYSE-listed companies and their investors as well as the trading community with lower price volatility; smaller spreads between best bid and offer; greater price improvement; more active participation by a broader range of market professionals; and overall deeper liquidity.
“Fast, electronic trading is the norm now, and our trading customers are looking for us to go beyond just fast and electronic – to offer something more. They want a market that encourages participants to add liquidity and helps them trade larger orders more efficiently,” said Lawrence Leibowitz, NYSE Euronext’s Group Executive Vice President in charge of U.S. Markets and Global Technology. “The NYSE is providing customers with a unique range of solutions for these challenges -- a rich combination of high-tech and high-touch features that no other market offers. Our listed companies and their investors also stand to benefit from the resulting tighter spreads, lower volatility and higher level of price improvement.”
Timetable for Transformation
Specifically, the SEC today approved a next-generation market model filed by the NYSE in June, and a new pilot program unveiled just today to attract new liquidity providers. Implementation of the new initiatives will begin next week and be completed in November.
- Specialists will be transformed into Designated Market Makers (DMMs) who have accountability for providing liquidity, better access to capital and risk-management capabilities, and are on an even playing field with other market participants in terms of trading parity and access to information.
- DMM quotes will be on parity with those of floor brokers and those on the Display Book, encouraging more DMM participation and higher market quality.
- The DMM ’s algorithm will no longer receive a “look” at incoming orders. This ensures that an intermediary will not see orders first, and that DMMs compete as a market participant.
- All market participants will have the opportunity to send a new type of reserve order with a published quantity of “zero.” This order will not be displayed to the DMM . Incoming orders will trade against better-priced dark interest before trading at the published NYSE best price, resulting in greater liquidity.
- DMMs will provide price improvement and match incoming orders based on a new Capital Commitment Schedule, which will be added to the NYSE Display Book and will receive only public information about orders.
- DMMs will have the obligation to maintain an orderly market in their stocks, quote at the national best bid or offer a specified percentage of the time, and facilitate price discovery at the open, close and in periods of significant imbalances.
- Putting the DMM ’s actions directly into the Display Book will further reduce order latency.
- A newly announced pilot program will establish Supplemental Liquidity Providers (SLPs), a new class of upstairs, electronic, high-volume members incented to add liquidity on the NYSE. The program will reward aggressive liquidity suppliers, who will complement and add competition to existing quote providers.
- SLPs will be obligated to maintain a bid or offer at the National Best Bid or Offer (NBBO) in each assigned security at least 5 percent of the trading day.
- The NYSE will pay a financial rebate to the SLP when the SLP posts liquidity in an assigned security that executes against incoming orders. The goal is to generate more quoting activity, leading to tighter spreads and greater liquidity at each price level.
- SLPs will trade only for their proprietary accounts, not for public customers or on an agency basis.
- An NYSE staff committee will assign each SLP a cross section of NYSE-listed securities. Multiple SLPs may be assigned to each issue. The pilot will start with a focus on highly active issues, and gradually expand its coverage.
- A member organization cannot act as a Specialist/Designated Market Maker and SLP in the same security.
- The SLP will have the same publicly available trading information and market data that all other NYSE customers have available to them.
Additional enhancements of the NYSE market model unrelated to today’s approvals by the SEC will be announced as they are implemented.
About NYSE Euronext
NYSE Euronext (NYX) operates the world’s leading and most liquid exchange group, and seeks to provide the highest levels of quality, customer choice and innovation. Its family of exchanges, located in six countries, includes the New York Stock Exchange, the world's largest cash equities market; Euronext, the Eurozone's largest cash equities market; Liffe, Europe's leading derivatives exchange by value of trading; NYSE Liffe, the company’s U.S. futures business and NYSE Arca Options, one of the fastest growing U.S. options trading platforms. NYSE Euronext offers a diverse array of financial products and services for issuers, investors and financial institutions in cash equities, options, futures and derivatives, ETFs, bonds, market data, and commercial technology solutions. As the world’s largest exchange group by number of listings and market capitalization, NYSE Euronext is home to more than 6,500 listed issues (as of Oct. 1, 2008) with total global market capitalization more than four times that of any other exchange group. The average daily trading value of NYSE Euronext's equity exchanges represent more than one-third of the world's cash equities trading. NYSE Euronext is part of the S&P 500 index and the only exchange operator in the S&P 100 index. For more information and free real-time stock prices for all NYSE-listed securities, please visit www.nyx.com.
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning NYSE Euronext’s plans, objectives, expectations and intentions and other statements that are not historical or current facts. Forward-looking statements are based on NYSE Euronext’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause NYSE Euronext’s results to differ materially from current expectations include, but are not limited to: NYSE Euronext’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk and U.S. and global competition, and other factors detailed in NYSE Euronext’s reference document for 2007 (“document de référence”) filed with the French Autorité des Marchés Financiers (Registered on May 15, 2008 under No. R. 08-054), 2007 Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission or the French Autorité des Marchés Financiers. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by NYSE Euronext that the projections will prove to be correct. This press release speaks only as of this date. NYSE Euronext disclaims any duty to update the information herein.