The New York Stock Exchange is to banish the privileged position of specialist firms on the trading floor as it bids to keep pace with competitors operating on faster automated platforms.
Under the new rules, filed by the Nyse in June and approved Friday by the SEC, specialist firms will be rebadged as Designated Market Makers who will be rewarded for adding liquidity and taking incoming orders during volatile markets. But the DMMs will no longer get an advanced look at the order book - a practice which has slowed trade reaction times and gives the floor brokers an unfair advantage over competing firms.
Lawrence Leibowitz, Nyse Euronext's group EVP in charge of US markets and global technology, says: "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."
Implementation of the new initiatives begins today and will be completed in November, he says.
SEC approval of the measures coincided with the launch of Bats Exchange as a national securities exchange. The Kansas-based ECN operator Bats Trading got the green light from the SEC to adopt formal exchange status in August.
Bats CEO Joe Ratterman says: "We look forward to participating directly in the national market system while competing on a level playing field with our primary competitors, Nasdaq and the New York Stock Exchange."
Bats Europe, the US group's multilateral trading facility is also gearing up for launch in London on Friday this week.