As I’m sure you have seen by now, the NYSE has decided to temporarily suspend the $1 price minimum requirement and extend the temporary change in market cap minimum from $25M to $15M for listed companies. We received approval from the SEC yesterday and both will be in effect through June 2009.

Why would we do this and more importantly why would we choose to do this now?

I think it’s safe to say that the current market conditions are unlike any we have ever seen. What started out as a problem for financial stocks has turned into a full-blown problem across all industries and around the world. Low-priced stocks have become a serious, widespread issue. Who would have imagined a world where several major blue chips in the DJIA trade around $2? And if big companies are trading at such low multiples, what does that mean for smaller companies?

To give you an example of how widespread the problem is: Bespoke Investment Group did an analysis on the S&P 500 and concluded that 27% of the index would not qualify for inclusion if being considered today. Not only that, but S&P would be hard pressed to come up with enough companies that would qualify to replace them, Bespoke said.

Trading below a dollar used to signal impending bankruptcy — not anymore. We believe that many companies have fallen victim to broad market moves even though they continue to have solid balance sheets, revenues and growth prospects. We are proud of our partnership with our listed companies and we view this temporary suspension as a relief provision so that our issuers can remain focused on their businesses rather than be distracted by factors that are largely the result of circumstances beyond their control. Because 2009 has begun much the way 2008 ended, now seems like the best time to offer companies this relief.

Here are the links to the NYSE press release and our SEC filing.

All the feverish activity over the last several months for the debut of the new state-of-the-art NYSE Amex Options Trading Floor in the Blue Room can be summed up in two words: GO LIVE. March 2, 2009 is the day that trading goes live in the Blue Room.

Since October 2008, when the Amex was acquired by NYSE Euronext, ’til March 2, the day the lights go on for the new trading floor, there has been fast and furious activity going on behind the scenes to prepare for opening the newest trading floor and electronic trading platform in the U.S.— a state-of-the-art hybrid trading system geared for the 21st century.

Exchange staff spanning several departments, plus clerks, market makers, specialists, floor brokers and clearing firms have all sacrificed long days and weekends to come in to build out the room, install equipment, train trading officials, brokers and market makers on all the exciting new functionality, culminating in a flurry of Saturday mock trading sessions to test the new systems and get ready for GO LIVE day. People have been staying late and coming in early to train on the new trading system.

This new trading system leverages production-tested NYSE Arca technology, which has been so successfully driving the NYSE Arca Equities and NYSE Arca Options electronic platforms for the past several years, and complements it with the LiquidPoint Floor Broker trading system, to create an exchange that offers both high-touch human trading and low-touch, high-speed, high-throughput electronic trading.

However you trade, whether by person-to-person contact or by entering all trades into an electronic environment, the new NYSE Amex Options is the place to be. Customer is king. (Have I mentioned lately that customers have priority and they never pay to trade?)

Not only customers, but all traders, professional and public, will benefit from the enhanced speed, liquidity, order executions and capacity improvements at the new NYSE Amex Options.

Over 300 people are making the move from 86 Trinity Place to 11 Wall St. New trading pits, new trading systems and state-of-the-art technology welcomes them and you to NYSE Amex Options. All of us invite you to experience it in real time, so come and trade. We are ready, are you?

Trade ‘em up!

TW

Your humble main blogger here has been distracted with other work lately, so apologies that this space has been so quiet. It’s not that there isn’t a ton of stuff going on. Here’s something that took place recently and is important in a couple of respects: NYSE Euronext’s equities trading successfully migrated onto the new Universal Trading Platform.

Why is this important? For our trading customers, the answer is in the Universal Trading Platform’s huge gains in speed, capacity and ease of access; for our technology customers, the answer is the platform’s potential to upgrade the system performance of other markets and financial firms. To explain this, I’m going to quote and annotate the press release, as well as a Dow Jones Newswire article on the subject of speed.

First, the press release from 17 February:

NYSE Euronext (NYX) announced that all European equities, including Exchange-Traded Fund (ETF) products, listed on the company’s Amsterdam, Brussels, Lisbon and Paris markets are now trading on its next-generation Universal Trading Platform(SM) following the successful migration of these markets from the Nouveau Système de Cotation (NSC) platform. (1)

The European transfer to the Universal Trading Platform represents a key milestone in the new electronic trading platform’s roll-out across NYSE Euronext cash and derivatives markets in Europe and the U.S.(2) In addition the Universal Trading Platform will offer access to the company’s new European Multi-Trading Facilities (MTFs): NYSE Arca Europe and SmartPool. Ultimately, trading customers will be provided with connectivity to all the NYSE Euronext markets through one world-class, ultra-low latency global network.

Roland Bellegarde, Group Executive Vice President and Head of European Execution for NYSE Euronext said, “We believe that our customers will immediately benefit from one single point of access to all our cash equities markets in Europe, thereby reducing costs and producing a dramatic increase in market efficiency. The introduction of the Universal Trading Platform is strategically important to our business, and gives us a significant competitive advantage in Europe, enabling us to meet the emerging needs of both existing and future customers.”

So for customers, one point of access = greater efficiency + lower costs.

Anthony Attia, Executive Director and Head of the Universal Trading Platform Program, said, “The delivery of the second stage in the roll-out of the Universal Trading Platform demonstrates NYSE Euronext’s commitment to continuous innovation in order to provide technology-driven efficiencies to our customers. They will benefit from the superior functionality, faster speed and much greater capacity of the Universal Trading Platform.”

Customers trading on NYSE Euronext European cash markets will realize reduced latencies from 1.5 milliseconds per roundtrip on NSC to 150-400 microseconds per roundtrip on the Universal Trading Platform . In addition to delivering exceptionally fast transaction speed and system-wide reliability, the Universal Trading Platform sets new industry standards for capacity with the ability to handle 100,000 orders per second.

I’m not the foremost expert on this (or on anything else, as you know) but I’ve never seen any other market talk about latency as low as 150 microseconds. Greater capacity is important as well, so that the market is accessible even during high-demand situations such as spikes or drops in stock prices.

Stanley Young, CEO of NYSE Technologies and co-Global CIO of NYSE Euronext said,”The Universal Trading Platform, which was developed by our in-house technology and business teams, provides a truly advanced market infrastructure and is based on the best-of-breed NYSE Euronext systems and technology. We see a tremendous opportunity to offer the Universal Trading Platform solutions set to other markets and financial service firms globally as a commercial offering from NYSE Technologies.”

Following the successful migration of the European bond market in December 2008, this second phase of the company-wide implementation of the Universal Trading Platform will be followed by its deployment on NYSE Arca Europe, NYSE Euronext’s new MTF which is set to launch in March 2009, and the NYSE Arca equities market in the U.S. in the third quarter of this year.

So the Universal Trading Platform is continuing its rollout to other NYSE Euronext markets. This will make them that much more competitive for high-speed traders. It also will offer NYSE Euronext as a company greater economies of scale and tech efficiency. Plus, the components of the platform will be offered to customers of NYSE Technologies, which is NYSE Euronext’s commercial-technology group.

Notes to Editors:

1. Over 2,000 European equity products migrated from the Nouveau Système de Cotation (NSC) platform onto the Universal Trading Platform, involving approximately 280 of NYSE Euronext’s European customers. All four European cash equity markets were involved: Amsterdam, Brussels, Paris and Lisbon.

2. The four platforms which the Universal Trading Platform will replace are as follows:
·The Nouveau Système de Cotation (NSC) for Euronext;
·NYSE Arca in the U.S.
·The electronic order book supporting the NYSE market.
·Liffe Connect® for the Liffe derivatives market.

3. The Universal Trading Platform’s rollout timetable is as follows:
·European bonds, 8 December 2008; successfully completed.
·European cash equities and ETFs, 16 February, 2009; completed.
·NYSE Arca Europe launch, expected March 2009;
·NYSE Arca in the U.S., expected Q3 2009;
·NYSE and start of roll-out on European Derivatives, expected Q4 2009.

4. The Universal Trading Platform is composed of four main components supported by NYSE Technologies:
·Trading Engine- the cross-market core of the platform which provides a rich function set for cash and derivatives markets and enables multiple market models to be configured for whole markets or individual product groups. Architected for ultra-high resiliency within and between data centres it also provides the ultra-low latency expected by the world’s most demanding exchanges.
·Common Customer Gateway - which provides clients with multi-format order entry and access to multiple trading platforms. It is physically located in NYSE Euronext data centers.
·Market Data Distribution - which allows for the efficient and flexible creation of new market data products and ultra-low-latency dissemination of information.
·Secure Financial Transaction Infrastructure (SFTI®) - the high performance network backbone which enables clients to have access to all NYSE Euronext services through a highly reliable, resilient, low-latency network infrastructure.

5. Definition of Milliseconds and Microseconds
·A millisecond is one thousandth of a second.
·A microsecond is one millionth of a second.

I love the explanatory notes! Note to self: start using them on my own press releases to de-mystify and help people cut though jargon.

Now, I can hear my frequent Exchanges correspondents saying: forget the speed, Ray, you guys need to focus on market quality! Quality remains a top priority for us as well, and that’s why — on NYSE, for example — we’ve introduced changes in our trading tools and rule set, as well as new pricing on NYSE and NYSE Arca, designed to attract more liquidity from participants on and off the NYSE Trading Floor.

But it’s worth noting that speed does matter — a lot — to many participants. This Dow Jones Newswire article (via EasyBourse.com) underscores the fact that to high-frequency proprietary traders, speed outranks price as a priority.

To me, all of these changes we’re introducing — ranging from lower latency for low-touch trading to enhanced capabilities for high-touch trading — demonstrate that NYSE Euronext is continually looking to hone our diverse platforms to serve our diverse customer base. The global marketplace is becoming ever more competitive, and NYSE Euronext is becoming more competitive right along with it.

Well, that was quite the long post, wasn’t it? Meandered right across the Atlantic too. Have a good weekend, folks.

Today in NYSE History
27 Feb. 1941 — William McChesney Martin, Jr. was drafted into military service and announced his resignation as NYSE president.

As I’m sure you have seen by now, the NYSE has decided to temporarily suspend the $1 price minimum requirement and extend the temporary change in market cap minimum from $25M to $15M for listed companies. We received approval from the SEC yesterday and both will be in effect through June 2009.

Why would we do this and more importantly why would we choose to do this now?

I think it’s safe to say that the current market conditions are unlike any we have ever seen. What started out as a problem for financial stocks has turned into a full-blown problem across all industries and around the world. Low-priced stocks have become a serious, widespread issue. Who would have imagined a world where several major blue chips in the DJIA trade around $2? And if big companies are trading at such low multiples, what does that mean for smaller companies?

To give you an example of how widespread the problem is: Bespoke Investment Group did an analysis on the S&P 500 and concluded that 27% of the index would not qualify for inclusion if being considered today. Not only that, but S&P would be hard pressed to come up with enough companies that would qualify to replace them, Bespoke said.

Trading below a dollar used to signal impending bankruptcy — not anymore. We believe that many companies have fallen victim to broad market moves even though they continue to have solid balance sheets, revenues and growth prospects. We are proud of our partnership with our listed companies and we view this temporary suspension as a relief provision so that our issuers can remain focused on their businesses rather than be distracted by factors that are largely the result of circumstances beyond their control. Because 2009 has begun much the way 2008 ended, now seems like the best time to offer companies this relief.

Here are the links to the NYSE press release and our SEC filing.

On the new NYSE Amex Options exchange, there are more types of orders than you can shake a tablet pc at. All of the standard order types we know and love will be joined by a variety of order types unique to NYSE Euronext options markets (more about these in a later post!). Along with these unique order types, NYSE Amex will also be adopting the Directed Order. Directed Orders are sent by OSFs (order-sending firms.) These orders are designed to interact with quotes that are entered by market makers.

Order-sending firms and order-flow providers can direct electronic orders to certain market makers or specialists who have an assignment in that options class. These market makers are eligible to receive a Directed Order if they are quoting at the NBBO (National Best Bid or Offer) at the time of the order’s arrival at the matching engine. After all customer interest is satisfied at the trade price (remember customer is king on NYSE Amex; customers trade first and never pay to trade) the Directed Order Market Maker will receive a 40% allocation of the remaining contracts.

Directed Order Market Makers will not receive any guaranteed participation on an inbound order if their bids or offers are not at the NBBO. Directed Order guaranteed participation is expressed as a percentage of the remaining quantity after all customer orders, if any, have been first executed. Market makers who receive Directed Orders must provide continuous two-sided market quotations 90% of the time in issues in which they receive Directed Orders.

Current quoting obligations for Market Makers dictate that they must provide continuous two-sided market quotations 60% of the time for issues they trade throughout the trading day. Directed Orders increase the quoting obligations for continuous two-sided markets to 90% of the time the issue is open on the exchange. Firms that have registered their intent to receive Directed Orders need to understand that the heightened quoting requirements are for all MMIDs (Market Maker Identification) associated with the firm’s ATPID (NYSE Amex Options Trading Permit identification) and all option classes that comprise that firm’s electronic quoting assignment.

Directed Orders help improve customer executions by providing incentives for specialists and market makers to tighten their quote spreads and increase liquidity at the NBBO. It is yet another reason that customers should come to NYSE Amex to trade.

Trade ‘em up!
TW

While MatchPoint can add value to all types of orders (and in low- and high-volatility markets), there are particular orders that reside on every order blotter and in every algo that are perfectly suited for MatchPoint. These are orders whose size or informational content is so sensitive that it takes days to execute. Very large order positions as well as mid-, small- and micro-cap orders can turn a successful funding, liquidation or transition into a transaction-cost debacle costing hundreds of basis points.

MatchPoint’s platform is a perfect place to quietly unwind/build up your tough positions or noiselessly access aggregated natural block liquidity while minimizing transaction costs. Your toughest orders to execute don’t belong on your OMS/EMS, they belong in MatchPoint. If not the entire order, then certainly a slice of each of these orders should always participate in the MatchPoint matches.

Why leak your small cap strategy across the ATS marketplace searching for unpredictable liquidity when you can retain control of your execution strategy and order information in a neutral exchange facility? Why leave a big block order accruing slippage and delay costs when there is an informationless place to tap natural block-aggregating liquidity?

Bring MatchPoint the 20% of your order blotter that makes you cringe every morning when you get to work….and it is sitting there…still waiting for you. Your tough orders need love too!

In what I have described as the first drip in the glacial melt of the global IPO market, Mead Johnson, a Bristol Myers Squibb (BMY) carve-out, successfully debuted on the NYSE yesterday. The IPO raised $720mm, priced at the high end of its price range, and traded up during the first day of trading. Investor demand for the offering was very strong, despite the near 400-point drop in the Dow on the day of pricing.

From our perspective, the company proved the notion that great companies can get out in bad markets, and actually perform quite well. We see a tremendous supply of companies that are similarly situated, but very tentative to test the waters. Buyers are willing to commit capital to growth opportunities they cannot otherwise find in the secondary market.

The Mead Johnson IPO was also a successful demonstration of the value proposition of the NYSE, both as a trading/listing platform, as well as a global media and visibility vehicle. On the trading side, the interaction between the underwriters, designated market makers, floor traders, and the electronic book contributed to a very orderly open. The deal priced at $24, opened at $26, traded at $26.12 one minute post open, and closed at $26.43. For the day, the NYSE’s quoted spread of $.036 was less than half of that experienced elsewhere, while the quoted size of 1,469 shares was more than double. NYSE was able to attract liquidity in the stock, with 70% of the market share in trading for the day.

We also worked closely with the company on a global visibility campaign, with coverage including 29 broadcast (TV/radio), 16 print, and 10 on-line mentions during the listing day. This distribution reached key Mead Johnson commercial markets such as China, and investors in all major financial markets.

These benefits help explain why:

– Based on IPO proceeds raised globally in 2008, NYSE Euronext retained its # 1 ranking among major exchanges globally, with $45 billion raised, or 37% of total IPO capital proceeds.

– In 2008, NYSE Euronext attracted the largest IPO in U.S. history, with Visa (NYSE: V), raising $17.86 billion/€11.5 billion, and in Europe, the second-largest IPO in Europe in 2008, with EDPR (NYSE Euronext: EDPR) raising $2.42 billion/€1.566 billion.

We welcome Mead Johnson to the NYSE family of listed companies, and look forward to continuing to provide these benefits to current and future members of the family.

This post is about an enhancement that probably is of interest only to those who pay really close attention to how the close of trading takes place, but I think it’s a positive change and worth noting if only for that subset of our audience.

And at bottom there’s a shout-out to Abraham Lincoln and Joseph Searles, so some of you might want to skip down to that.

NYSE and NYSE Amex have simplified and streamlined the process of how securities close when there’s an imbalance (more orders to buy than sell or vice versa). Here’s the memo if you need the details, and here is the bloggish summary, paraphrasing from the original:

Previously, when there was no imbalance at the close, there was a single closing transaction, also called a “closing print.” In that print, all of the buy and sell Market on Close orders and marketable Limit on Close orders were paired off at the price of the previous sale on the exchange.

But when there was an imbalance, there were two closing prints. The first closing print included all of the shares constituting the imbalance — that is, those that were not paired off. The price was the offer (in the case of a buy imbalance) or the bid (in case of a sell imbalance). The second closing print went off at the same price and included all of the paired-off MOC and marketable LOC orders.

The reason for doing two prints for closing imbalances was to create transparency. That first closing print told market participants the size of the closing imbalance. But having two prints also meant additional manual processing by the Designated Market Maker, and ran counter to our goal of keeping the close timely and efficient.

Enter a solution that provides more transparency and efficiency. Our NYSE Imbalance Datafeed and NYSE Amex Imbalance Datafeed now provide real-time data about order imbalances. The feeds start at 3:40 p.m. and update every 15 seconds from 3:40-3:50 p.m., and every 5 seconds thereafter until 4 p.m.

That stream of data provides more sunlight than the extra closing print did, and eliminates the additional manual processing. As a result, as of 6 Feb., we moved to single-print closes for imbalance situations.

As the memo puts it: “The consolidation of the prints…will reduce the amount of manual information to be reported by the [Designated Market Maker], thus increasing the speed and efficiency of the closing process, ultimately improving the quality of both markets with timelier reporting of closing transactions.” The memo also includes a specific example of the change, which you might want to check out if I’ve simplified it too much.

BTW, you might have also noticed that the former American Stock Exchange is referred to above as NYSE Amex. That’s the new name, replacing the too-long NYSE Alternext U.S.

• • •

Hey, on the occasion of Abraham Lincoln’s 200th birthday, how’s this for a fitting historic event that occurred on this day 39 years ago?

Today in NYSE History (NYSE.com)
12 Feb. 1970 — Joseph L. Searles III became the first black member of the NYSE.

Though MatchPoint is still in its infancy, it is already proving its potential with its initial prints to the tape. In a sea of faceless 100-share prints, MatchPoint trades stand out! For example, on Monday, MatchPoint executed the following matches (three among many and forgive the formatting):

Ticker Shares Price Time

SLT 2,900 $5.655 14:00:17
DVA 2,600 $45.870 10:00:24
SMTC 2,200 $13.155 13:00:23

Each of these trades (as small as I admit they are) dwarf any of the surrounding prints at the same time. And each MatchPoint print is clearly identified as an NYSE trade with an “X” identifier. And still, MatchPoint’s collective participant approach prevents even users (and tape-watching predators) from knowing whether a MatchPoint trade was against one large contraside or a combined contraside of many smaller users.

Liquidity aggregation, complete informational control and trade transparency all at the same time! Proof is on the tape and in your trading performance…unless, of course, you are not participating! Looking forward to seeing you on MatchPoint.

If you happened to be on the floor of the NYSE the last couple of Saturday mornings you would have heard something that sounded familiar. People were yelling for markets and others were yelling back quotes. But these were not equity quotes; these were option quotes. While the trading was only for testing and training purposes, the excitement was real. With the go-live date for NYSE Amex fast approaching, options trading is coming to the floor of the NYSE.

This is the biggest change for the Amex since they moved from trading on the curb to trading indoors. In the newly refurbished Blue Room (yes, the walls are painted blue, hence the name), NYSE Amex Options Traders and an incredibly dedicated Exchange team have been working through the kinks, getting their new place up and running for March 2 Go Live Day. On March 2, a new and exciting chapter in the history of NYSE, NYSE Amex and option trading in general will be written in the Blue Room.

Not only do the NYSE Amex guys and gals get new digs, they also get a brand-spanking-new trading system. NYSE Arca technology, so successful in driving the NYSE Arca Equities and NYSE Arca Options electronic platforms, in conjunction with the Liquidpoint Floor Broker trading system, will bring options trading on the NYSE Amex into the 21st century. We are in an electronic world. Listed options grew up being traded in an open-outcry environment. How do you meld the two? Electronic markets give speed and ease of access for market participants whether they are customers, firms or market-makers. Open outcry helps in price discovery, price improvement and added liquidity. The new Liquidpoint platform, linked with NYSE Amex trading engines, combines the two different trading approaches into a hybrid model that yields speed of transaction while also increasing liquidity and transparency.

On NYSE Amex, Customer is King. Customer orders have priority. They trade first. If a customer sends NYSE Amex an order and they are first to bid or offer at a certain price, they will be first to trade at that price. Being a customer on NYSE Amex has definite advantages.

Let me answer a couple of questions that you might have. Doesn’t NYSE Euronext already have an options exchange? Why have two? Yes we do: the NYSE Arca Options Floor in San Francisco is a hybrid exchange, also combining open-outcry trading with the NYSE Arca matching engines for electronic order flow. However, while NYSE Arca has a trading floor with market makers and brokers, the electronic trading market structure is modified price/time, and in the penny-pilot issues it’s on a post/take pricing model. It pays people who add liquidity and depth to our markets while charging others who take an offer or hit a bid.

NYSE Amex runs an alternative exchange model where the customer has priority and trades are allocated on a pro-rata matching algorithm, with specialist and directed-order guarantees tied to quoting obligations. It is a hybrid system where orders can be either in an electronic environment — letting our matching engines do the work — or an open-outcry system for complex orders that need special handling by humans.

On the NYSE Amex, do customer orders ever have to pay? No. Customers ALWAYS trade free on NYSE Amex. On NYSE Arca, if the order adds liquidity, we still pay you to trade (pay to trade — you have to like how that sounds). Of course if your order takes an offer or sells a posted bid, you get to pay for taking liquidity.

The addition of NYSE Amex brings tried and true technology that our clients love and joins it with an Exchange model that will appeal to a different set of clients, allowing us to offer you the widest possible array of trading algorithms, order types and pricing models.

With both models, NYSE aims to increase market depth and liquidity while cutting execution time and expense while using technology to give all market participants a level trading floor.

I encourage everyone to peruse the following links to better understand the myriad of different orders customers and traders can enter on NYSE Amex and NYSE Arca. With two different market structures, NYSE can satisfy the needs of all market participants.

One last quick note: who am I? I’m Todd Wilemon and I joined NYSE Euronext in January of 2009 after a 14-year career trading options. I started as a runner, moved my way up to crowd clerk, phone clerk, trade checker, floor broker, upstairs broker, floor market maker and upstairs trader. After all that, I still get excited walking on a trading floor. I am a radical for freedom and liberty. Free markets ensure and protect our liberty. That is why I am excited by where NYSE Euronext has been but more excited where we are going to take markets and trading in the future.

Trade ‘em up!

TW