Also speeding it up: The American hurdler Dawn Harper after winning the women’s 100-meter hurdles final at the Olympics. Photo: Franck Robichon/European Pressphoto Agency, via NYTimes.com
A number of you have written here that you’re unhappy with how our Liquidity Replenishment Points (LRPs) work, saying that they kick in too often and can contribute to execution prices that appear out of whack. As I’ve noted in this space, we’ve been listening: here’s the latest, from an NYSE Trader Update issued yesterday:
Liquidity Replenishment Points (LRPs) Timer Pilot
20 Aug 2008
On 21 August 2008, the NYSE will commence a pilot regarding the calculation of its Liquidity Replenishment Points (LRPs) in an effort to increase the availability of NYSE quotes eligible for automatic execution. In accordance with Rule 1000, the NYSE will revert to auto-quoting in situations where the LRP has been hit but the market is not locked or crossed. The timeframe to go fast again will be reduced from ten seconds to five seconds.
In addition, the recalculation of LRPs, currently done every 30 seconds, will be reduced to every ten seconds.
The pilot will being with Agrium Inc., symbol AGU. A list of the pilot stock symbol will be provided here.
These changes represent the fixes we could initiate now; we’re also looking at one that will take a little longer. Here’s a bit of backstory on what we’re doing and what’s yet to come on this issue:
The LRPs were designed to give our auction an opportunity to conduct a quick price discovery when the price of an issue is moving rapidly up or down. But with each LRP lasting as long as 10 seconds, and the range of the LRP being recalculated every 30 seconds, the market can get out of whack.
For example, the LRPs themselves are triggered only several hundred times a day in total across the market; but NYSE quotes go “slow” far more often than that, making it look like an LRP was hit. In fact, often the culprit is that because the market was moving, the quote went wider than the LRP range, resulting in a “slow” quote.
We believe that speeding up the duration of the LRPs to 5 seconds from 10 and the recalculation to every 10 seconds from 30 will help. We’re piloting this in one stock starting today, will watch it closely and will roll it out quickly if the results are positive.
On the longer-term front, we’re also actively looking at proposing to expand the LRP bandwidths themselves. We can’t do that unilaterally; it will require approval from the Securities and Exchange Commission.
We’ll keep you posted on both fronts. My sincere thanks to those of you who have commented on this; your input has helped validate what we ourselves have been observing.
Happy Thursday, folks. Sorry this space has been so quiet (except for the comments, which happily keep on keepin’ on). Day job has been busy, busy, busy here. That’s a good thing, in general, but will try to get back here more frequently.
On the trivia front, Born On This Day (NYTimes.com) in 1904: the late, great William “Count” Basie, the man who “put wheels on all four bars of the beat.” From the Times’ excellent obit:
Mr. Basie, a short, stocky, taciturn but witty man who liked to wear a yachting cap offstage, presided over the band at the piano with apparent utmost casualness. He flicked out tightly economical, single-finger passages, directing his musicians with a glance, a lift of an eyebrow or a note hit gently but positively in passing.
His piano style, which often seemed bare and simple, was an exquisitely realized condensation of the florid “stride” style of Fats Waller and James P. Johnson with whom Mr. Basie started.
Unostentatious as Mr. Basie appeared, his presence was a vital factor in directing his band or any group of musicians with whom he might be playing. There was a memorable concert at Town Hall several years ago when a number of musicians, including Mr. Basie, were scheduled to perform in a variety of combinations.
A group that included some Basie sidemen was on stage, playing in a ragged, desultory fashion, when Mr. Basie arrived. The pianist in the combo gave up his seat to Mr. Basie who sat down, tinkled a few introductory notes, looked up at the drummer, nodded at the rest of the group and, when the combo took off, the musicians were playing as brilliantly and cleanly as they had been disheveled only a few moments before.
