The New York Stock Exchange is to expand access to automatic trading under a package of reforms drawn up by new chief executive John Thain.
A former Goldman Sachs executive, Thain was appointed to the top spot at the Nyse just three weeks ago and charged with heading off the competitive threat posed by rival electronic communications networks and rebuilding confidence in the market. His appointment followed months of controversey over executive pay levels and allegations of widespread fraud and malpractice in the trading of large blocks of shares by the exchange's specialist marketmakers.
Chief among Thain's remedies, approved yesterday by the Nyse board, is a widening of access to the Nyse Direct+ automatic execution service enabling institutional investors to get more large orders executed automatically and faster. The board also approved salary cuts of up to 20% for senior Nyse executives.
Says Thain: "Today's initiative complements market-structure rules that ensure investors in Nyse-listed stocks receive best-price trade executions. We will work to keep those rules in place."
Specifically, the board approved eliminating two of the trading restrictions in the current rules – the 30-second limitation for consecutive orders and the 1099-share size limit for orders – and the addition of market orders to those eligible to trade via Nyse Direct+ (currently, only limit orders are eligible).
Begun as a pilot in December 2000 and fully implemented in April 2001, Nyse Direct+ today executes seven per cent of consolidated volume in Nyyse-listed equities – more than that executed by all electronic communications networks combined.
Expansion of the system is expected to head off the threat posed by proposed SEC rule changes that would allow investors to make trades on markets offering the fastest execution, not just the best price.
The changes are to be implemented in phases to ensure that the Nyse and order-routing vendors can make necessary technology adjustments for each step.