The New York Stock Exchange is expanding trading on its storied floor as part of a move to an integrated technology system for trading equities and options on its markets.
NYSE, owned by Intercontinental Exchange, plans to roll out the technology system, called Pillar, throughout 2017. As part of the move it will increase the number of securities that can be traded on the floor from 3,166 to the full compliment of 8,600, including Nasdaq-listed stocks and exchange traded funds.
“Our plan to provide even greater access to trade US securities is a positive move toward bolstering fair and transparent liquidity and offering even greater choice,” said Stacey Cunningham, NYSE’s chief operating officer. “We are committed to our proven market model that combines high-tech trading capabilities with human judgment at the point of sale on our iconic NYSE trading floor.”
The changes will not necessarily require an increase in the number of floor traders because the designated market makers will continue to serve just the NYSE-listed companies even if they can trade other securities electronically.
“The extent [to which] they can extend the New York model to more symbols [means] they can get more volume and more volume means more revenue,” said Larry Tabb, founder of the Tabb Group, a capital markets consultancy.
Under the plan, market participants will also be able to trade all securities that are listed on the exchange, whether on the Big Board; NYSE Arca, an electronic venue; or NYSE MKT.
The rationale is to offer traders and investors different options, including for speed which has become a controversial issue. The trading floor, for example, uses a “parity” model — enabling competing orders at the same price to share executions regardless of when an order arrives — versus Arca, which prioritises speed. Orders there are filled at the best price on a first-come, first-served basis.
The historic Big Board has been a bastion of open-outcry trading even as the rest of the trading universe has moved to electronic trading. The floor of the New York Mercantile Exchange, the leading energy and metals exchange, for example, closed at the end of 2016. NYSE itself is ending floor trading for NYSE MKT, its venue for small capitalisation stocks.
In December, NYSE bought the National Stock Exchange, the US’s smallest bourse, giving it another exchange to experiment with a new speed or pricing model.
Since IEX was approved as an exchange last year, other exchanges have proposed different speed models. IEX uses a 350-microsecond delay for orders to thwart high-frequency traders in what it believes is a market system that allows them to race ahead of slower investors to take advantage of price changes before they formally update.