Line of the day goes to Jamie Selway, in his response to today’s post, ‘There are now more than 55 equity venues in the U.S.’ :

The “number” of dark pools is exceeded only by the number of consultants writing about the number of dark pools.

by Jamie Selway on March 18, 2008 12:13 PM

This afternoon’s Fed announcement triggered a surge in messages coursing through our trading-support systems, setting nine new records, some of which had been standing since January (ancient history these days!). No system problems were reported.

For you techphiles out there, here are the new records. Note, I edited out a couple of them to eliminate the duplication of multiple records set by a single system over the course of a minute or two.

CQS (Consolidated Quote System) 5 min throughput record of 34856.8 messages per second established at 14:19:00. Replaces previous record of 31652.1 messages per second established on 03/18/2008 at 14:13-14:17.

CQS 1 min throughput record of 36345.5 messages per second established at 14:16:00. Replaces previous record of 34998.2 messages per second established on 03/18/2008 at 14:14.

CQS 30 sec throughput record of 37592.3 messages per second established at 14:15:30. Replaces previous record of 36497.1 messages per second established on 03/18/2008.

CTS (Consolidated Tape System) 5 min throughput record of 3024.3 messages per second established at 14:19:00. Replaces previous record of 2808.0 messages per second established on 03/14/2008 at 10:00-10:04.

CTS 30 sec throughput record of 3931.7 messages per second established at 14:15:30. Replaces previous record of 3808.6 messages per second established on 03/11/2008 at 15:59:00.

IGS (Information Generation System) 1 min throughput record of 30016.1 messages per second established at 14:16:00. Replaces previous record of 27987.9 messages per second established on 01/31/2008 at 15:57.

CQS 1 min throughput record of 34998.2 messages per second established at 14:15:00. Replaces previous record of 31755.9 messages per second established on 02/25/2008 at 14:25.

I’ve mentioned here previously, the capacity to accommodate these spikes in message traffic requires a lot of planning and investment on our part. It’s largely unseen part of the exchange business, and I’m glad (and relieved!) when it bears fruit as it did today.

This afternoon’s Fed announcement triggered a surge in messages coursing through our trading-support systems, setting nine new records, some of which had been standing since January (ancient history these days!). No system problems were reported.

For you techphiles out there, here are the new records. Note, I edited out a couple of them to eliminate the duplication of multiple records set by a single system over the course of a minute or two.

CQS (Consolidated Quote System) 5 min throughput record of 34856.8 messages per second established at 14:19:00. Replaces previous record of 31652.1 messages per second established on 03/18/2008 at 14:13-14:17.

CQS 1 min throughput record of 36345.5 messages per second established at 14:16:00. Replaces previous record of 34998.2 messages per second established on 03/18/2008 at 14:14.

CQS 30 sec throughput record of 37592.3 messages per second established at 14:15:30. Replaces previous record of 36497.1 messages per second established on 03/18/2008.

CTS (Consolidated Tape System) 5 min throughput record of 3024.3 messages per second established at 14:19:00. Replaces previous record of 2808.0 messages per second established on 03/14/2008 at 10:00-10:04.

CTS 30 sec throughput record of 3931.7 messages per second established at 14:15:30. Replaces previous record of 3808.6 messages per second established on 03/11/2008 at 15:59:00.

IGS (Information Generation System) 1 min throughput record of 30016.1 messages per second established at 14:16:00. Replaces previous record of 27987.9 messages per second established on 01/31/2008 at 15:57.

CQS 1 min throughput record of 34998.2 messages per second established at 14:15:00. Replaces previous record of 31755.9 messages per second established on 02/25/2008 at 14:25.

I’ve mentioned here previously, the capacity to accommodate these spikes in message traffic requires a lot of planning and investment on our part. It’s largely unseen part of the exchange business, and I’m glad (and relieved!) when it bears fruit as it did today.

This afternoon’s Fed announcement triggered a surge in messages coursing through our trading-support systems, setting nine new records, some of which had been standing since January (ancient history these days!). No system problems were reported.

For you techphiles out there, here are the new records. Note, I edited out a couple of them to eliminate the duplication of multiple records set by a single system over the course of a minute or two.

CQS (Consolidated Quote System) 5 min throughput record of 34856.8 messages per second established at 14:19:00. Replaces previous record of 31652.1 messages per second established on 03/18/2008 at 14:13-14:17.

CQS 1 min throughput record of 36345.5 messages per second established at 14:16:00. Replaces previous record of 34998.2 messages per second established on 03/18/2008 at 14:14.

CQS 30 sec throughput record of 37592.3 messages per second established at 14:15:30. Replaces previous record of 36497.1 messages per second established on 03/18/2008.

CTS (Consolidated Tape System) 5 min throughput record of 3024.3 messages per second established at 14:19:00. Replaces previous record of 2808.0 messages per second established on 03/14/2008 at 10:00-10:04.

CTS 30 sec throughput record of 3931.7 messages per second established at 14:15:30. Replaces previous record of 3808.6 messages per second established on 03/11/2008 at 15:59:00.

IGS (Information Generation System) 1 min throughput record of 30016.1 messages per second established at 14:16:00. Replaces previous record of 27987.9 messages per second established on 01/31/2008 at 15:57.

CQS 1 min throughput record of 34998.2 messages per second established at 14:15:00. Replaces previous record of 31755.9 messages per second established on 02/25/2008 at 14:25.

I’ve mentioned here previously, the capacity to accommodate these spikes in message traffic requires a lot of planning and investment on our part. It’s largely unseen part of the exchange business, and I’m glad (and relieved!) when it bears fruit as it did today.

So says Tabb Group CEO and founder Larry Tabb, quoted in a brief Securities Industry News article with the wonderfully succinct headline, “Equity Venues > 55.”

So much for the NYSE-Nasdaq duopoly we read so much about a couple of years ago. Competition appears to be more alive and well than ever in the equity markets.

Excerpt:

There are now more than 55 venues in the U.S. equities market, according to a recent report from New York-based Tabb Group. “The popular myth that the markets will centralize again is probably incorrect,” said Tabb Group CEO and founder Larry Tabb, author of “U.S. Equity Market Structure: Driving Change in Global Financial Markets.” With the growing number of execution destinations, noted Tabb, “the way traders now access the financial markets has changed radically.”

Tabb said that the markets “actually look like they are going into something we’re calling consolidated proliferation,’ where you wind up with a single liquidity pool that has two or three different trading models within it. You get the economics of consolidation, but you get the multiple business models … so that the arbitrage liquidity just doesn’t disappear.”

The report, which I have not yet seen, also takes a shot at floor trading, saying that with today’s smart routing and low latency, calling a broker on a trading floor is like putting horses in the Daytona 500. That’s a fashionable thing to say but I don’t agree, for two reasons.

First, floor brokers themselves increasingly are getting the technological tools to participate in today’s “fast” market, though of course those tools cannot come online fast enough.

Second, there’s the real world — how things really get done. When last measured last fall, there were more than 3,500 outgoing and incoming calls a day on our floor brokers’ mobile phones alone. I don’t know what that number would be today, but I do know that the 3,500 doesn’t include calls from land lines in the brokers’ booths, which undoubtedly would add many more to that number. All of those calls ultimately represent communications with off-floor customers, who obviously continue to derive value from talking with their floor brokers.

I’ll post some more about mobile phones soon, as there’s some news on that front.

So says Tabb Group CEO and founder Larry Tabb, quoted in a brief Securities Industry News article with the wonderfully succinct headline, “Equity Venues > 55.”

So much for the NYSE-Nasdaq duopoly we read so much about a couple of years ago. Competition appears to be more alive and well than ever in the equity markets.

Excerpt:

There are now more than 55 venues in the U.S. equities market, according to a recent report from New York-based Tabb Group. “The popular myth that the markets will centralize again is probably incorrect,” said Tabb Group CEO and founder Larry Tabb, author of “U.S. Equity Market Structure: Driving Change in Global Financial Markets.” With the growing number of execution destinations, noted Tabb, “the way traders now access the financial markets has changed radically.”

Tabb said that the markets “actually look like they are going into something we’re calling consolidated proliferation,’ where you wind up with a single liquidity pool that has two or three different trading models within it. You get the economics of consolidation, but you get the multiple business models … so that the arbitrage liquidity just doesn’t disappear.”

The report, which I have not yet seen, also takes a shot at floor trading, saying that with today’s smart routing and low latency, calling a broker on a trading floor is like putting horses in the Daytona 500. That’s a fashionable thing to say but I don’t agree, for two reasons.

First, floor brokers themselves increasingly are getting the technological tools to participate in today’s “fast” market, though of course those tools cannot come online fast enough.

Second, there’s the real world — how things really get done. When last measured last fall, there were more than 3,500 outgoing and incoming calls a day on our floor brokers’ mobile phones alone. I don’t know what that number would be today, but I do know that the 3,500 doesn’t include calls from land lines in the brokers’ booths, which undoubtedly would add many more to that number. All of those calls ultimately represent communications with off-floor customers, who obviously continue to derive value from talking with their floor brokers.

I’ll post some more about mobile phones soon, as there’s some news on that front.

With the futures up significantly this morning, NYSE is invoking Rule 48 today, as we did yesterday. That means that mandatory opening indications are not required. Here again is the background on the rule:

Rule 48 provides the exchange with the ability to suspend the requirement to disseminate price indications and obtain floor-official approval prior to the opening when extremely high market-wide volatility could cause delay opening securities on the exchange.

Rule 48 is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair floor-wide operations at the exchange by impeding the fair and orderly opening of securities. Accordingly, the rule sets forth a number of factors to be considered before declaring such a condition, including:

– Volatility during the previous day’s trading session;
– Trading in foreign markets before the open;
– Substantial activity in the futures market before the open;
– The volume of pre-opening indications of interest;
– Evidence of pre-opening significant order imbalances across the market;
– Government announcements;
– News and corporate events; and,
– Any such other market conditions that could impact floor-wide trading conditions.

So yes, even bullish market conditions can trigger the rule. The invocation of Rule 48 is in effect only for today. Previously, the NYSE invoked the rule on 11 and 17 March, 2008; 22 and 23 Jan., 2008; and 12 Dec., 2007. The rule was approved by the Securities and Exchange Commission on 6 Dec., 2007.

And please forgive my usual reminder to subscribe to our System Status Notifications via RSS.

Will post some more stuff later; wanted to put this up in a hurry.

Reg NMS Is a Winner, SEC Says (TradersMagazine.com) Excerpt:

According to an analysis conducted by SEC economists, key market metrics such as speed, width of spreads and depth have all improved since Reg NMS went into effect. On top of that, institutional trading costs, as measured by independent researchers, came down as well, according to a top SEC official.

“All the statistics run counter to the commonly heard impression that increased fragmentation since Reg NMS has led to reduced liquidity,” Dan Gray, market structure counsel in the SEC’s Division of Trading and Markets, said in a speech at this year’s Security Traders Association of Chicago (STAC) conference. …

The economists found execution speeds dropped, primarily for NYSE-listed securities. At the NYSE itself, the average speed for a market order fell from 12 seconds in April 2005 to two-tenths of a second in April 2007. They also found that spreads at the NYSE-both quoted and effective-narrowed by 10 percent.

Displayed depth increased substantially from April 2005 to April 2007, the SEC determined. For the Russell 1000 stocks, average consolidated depth at the inside quotes increased by more than 50 percent, according to Gray. “Promoting greater depth was one of the commission’s major policy goals for NMS,” Gray told STAC attendees.

As the article goes on to point out, traders have a very different point of view. Someone, please explain to me the reason why there’s such a disconnect. Here’s a quote from the same conference:

Cheryl Cargie, head trader at Ariel Capital Management, told STAC attendees that it was much harder to find liquidity “because the market is so fragmented.” She added: “You can’t go down to the floor anymore. You can’t say Give me a look on this.’ Where do I go? How do I do this? How do I tell the portfolio manager that I didn’t get anything done?”

Reg NMS Is a Winner, SEC Says (TradersMagazine.com) Excerpt:

According to an analysis conducted by SEC economists, key market metrics such as speed, width of spreads and depth have all improved since Reg NMS went into effect. On top of that, institutional trading costs, as measured by independent researchers, came down as well, according to a top SEC official.

“All the statistics run counter to the commonly heard impression that increased fragmentation since Reg NMS has led to reduced liquidity,” Dan Gray, market structure counsel in the SEC’s Division of Trading and Markets, said in a speech at this year’s Security Traders Association of Chicago (STAC) conference. …

The economists found execution speeds dropped, primarily for NYSE-listed securities. At the NYSE itself, the average speed for a market order fell from 12 seconds in April 2005 to two-tenths of a second in April 2007. They also found that spreads at the NYSE-both quoted and effective-narrowed by 10 percent.

Displayed depth increased substantially from April 2005 to April 2007, the SEC determined. For the Russell 1000 stocks, average consolidated depth at the inside quotes increased by more than 50 percent, according to Gray. “Promoting greater depth was one of the commission’s major policy goals for NMS,” Gray told STAC attendees.

As the article goes on to point out, traders have a very different point of view. Someone, please explain to me the reason why there’s such a disconnect. Here’s a quote from the same conference:

Cheryl Cargie, head trader at Ariel Capital Management, told STAC attendees that it was much harder to find liquidity “because the market is so fragmented.” She added: “You can’t go down to the floor anymore. You can’t say Give me a look on this.’ Where do I go? How do I do this? How do I tell the portfolio manager that I didn’t get anything done?”

NYSE has invoked Rule 48 today. That means that mandatory opening indications are not required. Here’s some background on the rule:

Rule 48 provides the exchange with the ability to suspend the requirement to disseminate price indications and obtain floor-official approval prior to the opening when extremely high market-wide volatility could cause delay opening securities on the exchange.

Rule 48 is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair floor-wide operations at the exchange by impeding the fair and orderly opening of securities. Accordingly, the rule sets forth a number of factors to be considered before declaring such a condition, including:

– Volatility during the previous day’s trading session;
– Trading in foreign markets before the open;
– Substantial activity in the futures market before the open;
– The volume of pre-opening indications of interest;
– Evidence of pre-opening significant order imbalances across the market;
– Government announcements;
– News and corporate events; and,
– Any such other market conditions that could impact floor-wide trading conditions.

The invocation of Rule 48 is in effect only for today. Previously, the NYSE invoked the rule on 11 March, 2008; 23 Jan., 2008; 22 Jan., 2008; and 12 Dec., 2007. The rule was approved by the Securities and Exchange Commission on 6 Dec., 2007.

Now add 17 March, 2008 to the list. I kind of had an uneasy feeling all weekend about Bear Stearns, and felt even worse upon seeing the announcement on Sunday night. To my train buddy at Bear Stearns and his colleagues, I’m sorry to see this happen.

And just for reference, here’s a link to our circuit breakers. Here’s hoping we don’t need them today. Or any other day, for that matter.

Good luck today, everyone.

Reminder: if you subscribe to our System Status Notifications via RSS, you don’t have to wait on your humble blogger to get word of Rule 48s, system issues, etc. I mean, I might be otherwise engaged, like when I’m in a meeting, or powdering my nose, and when you have a nose like mine, that takes a bit of time.

A bit of the Depression-era history for you today:

Today in NYSE History (NYSE.com)
17 March 1938 — Former NYSE president Richard Whitney was expelled from membership following the discovery that he had misappropriated his customers’ funds. He served a 3-year prison term at Sing Sing.

From the Big Board to the Big House, that’s quite the downtick.

And a flashback to better times on the Street:

Financial Flashback (WSJ.com)
17 March, 2002 — Wall Street’s blockbuster year was even bigger than expected. Pretax profits in 1991 soared to a record $5.8 billion-$5.9 billion. That performance — during a national recession — is $300 million higher than even many bullish analysts predicted.