This note went out to the NYSE member-firm community yesterday. I re-play it here for the benefit of anyone who missed it, plus those readers outside that community.

The NYSE has made some recent changes to CMS, which will improve capacity, leading to reduced latency for order ACKs, U R Outs and execution reports. Prior to making this change available for the on-line systems, the NYSE would like firms to test this new functionality using our test environment. Firms should validate that data has been received and that your firm’s system can process that data correctly.

Testing for these changes will be held on Saturday, January 5, 2008 and Saturday, January 12, 2008. To schedule a test date for your firm for this new initiative, please call the Service Desk at 866-873-7422. Thank you.

Change Description:

The modification referenced above made to CMS enables larger outbound blocks of messages to be built. These larger blocks are built by the FCS engine in CMS and then communicated to the TCP process in CMS. This significantly reduces the number of CMS writes by increasing the block size from 512 bytes to 32000 bytes, roughly increasing the size 64 times. Each message within the block is a separate and discrete message, having its own header, and should look exactly the same to the receiving system, when the block is broken down and reconstructed by TCP/IP as it is written across the wire. This modification significantly reduces CMS overhead, resulting in higher CMS capacity. As stated above these changes will lead to reduced latency for order ACKs, U R Outs and execution reports.

I know that speed isn’t always everything in getting an order done — there’s that little thing called best price to think about, for instance — but less system latency is always a good thing.

That note, of course, sent this layman off to the phone, asking people, “What is an order ACK?” I mean, is it when you hit the wrong key and buy a million shares instead of a million dollars worth, and you say, “ACK, the head of the desk is gonna kill me!”

Of course, it’s not. It’s an order acknowledgment. And a U R Out message validates that you’ve cancelled your order. Thanks to my colleague Bob Airo for leaving me a callback message explaining those.

Enjoy your weekend, my friends. Hey, here’s one of those intersection-of-music-and-finance bits of trivia I love to trot out there:

Financial Flashback (WSJ.com) — December 4, 1983: Rock stations are playing more songs that lament layoffs and factory shutdowns. They include Paul McCartney’s “The Pound is Sinking,” Jethro Tull’s “Fallen on Hard Times” and Dire Straits’s “Industrial Disease.”

If anybody’s writing that kinda stuff these days about the subprime crisis, or the dollar sinking, I haven’t heard it. Let me know what I’m missing.

I M Out.

Another catching-up piece, this one for you techies out there. Similar articles ran in many other industry publications. HP Linux servers bolster NYSE trading app (searchenterpriselinux.com) Excerpt:

In a rare glimpse into a mission-critical Wall Street IT operation, the New York Stock Exchange (NYSE) has confirmed that it recently purchased roughly 600 Hewlett-Packard Co. servers in support of its Linux-based online trading system.

NYSE introduced the electronic trading system, the NYSE Hybrid Market, in October 2006 to allow investors to buy and sell stocks on the trading room floor and via the Internet. The NYSE Hybrid Market now handles more than 500 million messages a day, requiring more servers and storage, said Steve Rubinow, the chief information officer at NYSE. …

. . .

“We have thousands of servers, and we are trying to architect our applications to make them more efficient, which starts with the software,” Rubinow said. “If you have inefficient software, you end up throwing more hardware at it.”

NYSE uses Linux because it’s a more flexible and cost-effective operating system than most other options, according to Rubinow.

“We favor Linux for what we do. We don’t want to be beholden to any one [hardware or software] supplier, even if it is very good. We want the freedom to be vendor-independent, so Linux was a good choice,” said Rubinow.

OK, I’m fully recovered from the eggnog overdose after-effects, and trying to catch up on some things I’ve missed recently. Here is one of several I’ve been meaning to blog about: a post from CNBC’s Bob Pisani — Outlook ‘08 Predictions: NYSE, Dollar, SEC And More (CNBC.com)

Longtime Exchanges readers know what I think about predictions in general: take them with a grain of salt. That notwithstanding, I found Pisani’s commentary blogworthy because a) Pisani reports from NYSE for CNBC, so he has the perspective of someone who works here but isn’t paid to drink and spout our Kool-Aid; and b), it’s about the NYSE trading floor. Excerpts:

Contrary to all expectations, the NYSE floor will not disappear; new investment from Lehman and one or two other firms that will buy into the renamed specialist business will stabilize the trading floor.

. . .

New SEC rule changes will inject life into the specialist system at the NYSE. The long-desired changes will help the long-term viability of the specialist system, and will once again help the specialist companies regain profitability.

My views on predictions aside, I do happen to think he’s right on this one. Your thoughts on that are welcome, as always, in the comment box below. In particular, I’d love to hear from some specialists and floor brokers on the subject.

Let me also note that elsewhere in the same piece, Pisani talks about merger prospects for NYSE Euronext. My agreement with his floor prediction should in no way be misconstrued as a comment about his M&A prediction. On the latter subject, I don’t know, and if I knew I couldn’t tell you.

I’m just not that kind of guy.

Also, just a reminder, our policy in this space is that our links to and comments on things we personally and professionally find of interest do not represent an endorsement of those things, or a guarantee of their accuracy. And any commercial recording, re-broadcast, replay or other use of this broadcast without the express written consent of Major League Baseball and the New York Yankees is prohibited by … um, sorry, got carried away there.

Today in NYSE History
04 Jan 1861 — The NYSE was closed for a national day of fasting, humiliation, and prayer.

Wow. Fasting, humiliation and prayer. They don’t make national holidays like they used to! Maybe they should?

The start of every new quarter and every new year brings renewed hope to the financial world and…wait for it…new levels for the ol’ NYSE circuit breakers. Woo-hoo!

OK, gang, work with me here. I’m trying.

Happy 2008 to all Exchanges readers out there. Recover from that eggnog hangover yet?

Me neither.

Oh well, back to it. May 2008 bring all of us peace and prosperity, and all good things to you and yours.

And may we never have to see these circuit breakers kick in. As a reminder, they trigger trading halts should the market decline 10, 20 or 30 percent in a single day. Read the press release linked above for the gory details.

Although it’s a new year, your humble blogger will still indulge the longstanding penchant for trivia:

Today in NYSE History (NYSE.com)
02 Jan 1929 — Members began wearing identification badges on the trading floor.

By the end of that year, those badges — and the names written upon them — surely were worth a great deal less than at the beginning.

Financial Flashback (WSJ.com)
January 2, 2003 — The bear market is finally over … or is it? The Dow Jones Industrial Average fell 16.8% in 2002, its sharpest decline since 1977. The broad Standard & Poor’s 500-stock index fell even more, 23.4% — its worst year since 1974.

Also On This Day (NYTimes.com), Isaac Asimov was born. Here’s to the late, great writer.

I don’t know how many of you will look at this as an early Christmas present, but it’s landing in your stocking this morning nonetheless — pre-opening indications start today.

For those of you who hit the eggnog a little too hard last weekend, here’s a refresher on indications, excerpted from the above-linked memo to members:

From 1978 until June 2007, specialists were required under NYSE Rule 15 to send out pre-opening indications under certain conditions that were set out first in the Intermarket Trading System Plan and subsequently in the Regulation NMS Linkage Plan that replaced the ITS Plan in March 2007. In June 2007, the Linkage Plan was terminated and Rule 15 became inoperative. Accordingly, as of July 2007, specialists no longer were required to disseminate pre-opening indications.

Since the elimination of the Linkage Plan, NYSE customers and market participants have requested that the NYSE reinstate the requirement for specialists to disseminate pre-opening notifications. In response, the NYSE has amended NYSE Rule 15 to re-establish procedures for the publication of pre-opening price information. …

As amended, NYSE Rule 15 requires a specialist to publish a pre-opening price indication whenever the specialist, in arranging the opening transaction in a subject security, anticipates that the price of the opening transaction will be at a price which is different from the previous day’s consolidated closing price by more than the “applicable price change” (described below). The pre-opening price indication will include the security and the price range within which the specialist anticipates executing the opening transaction.

The “applicable price change” will be $0.50 where the consolidated closing price of a subject security on the Exchange is under $100 and $1.00 where the consolidated closing price of a subject security on the Exchange is equal to or greater than $100.

The pre-opening indications will be published to Floor broker hand held devices, and to overhead displays on the Floor (“FIDs”), and will be made available to subscribers of NYSE Market Data Alerts.

Ah, the gift of transparency. Beats new socks!

So the late, much-unloved ITS (may it rest in pieces) did have something to recommend itself: these pre-opening indications, which disappeared last summer but are back by popular demand.
I know that Todd and Jamie asked about them in this very space. They must have been very good boys this year, because Santa has not forgotten them.

Speaking of the jolly dude in the red suit, he’s ringing the Closing Bell today at 1 p.m. EST — don’t forget the early close, that ain’t no lump of coal, either!

And those of you who aren’t enlisted already, a reminder that you can subscribe via RSS to this kind of news through the Exchanges blog, or through NYSE System Status Notifications, or NYSE Data Announcements.

Merry Christmas to you and yours, my friends.

Today in NYSE History
24 Dec 1963 — The annual volume record of 1.124 billion shares, set in 1929, was finally surpassed after 34 years.

Today’s quarterly expirations of index futures and options helped produce record trading volume in the first hour of trading at NYSE, exceeding the high set on Sept. 21, the previous quarterly expiration date.

The first half hour today produced volume of 790 million shares, topping the old record of 704 million.

Today’s first hour saw volume of 903 million shares, compared with the previous record of 805 million shares.

Hope it’s all going your way.

Here’s the related press release. And speaking of history…

Today in NYSE History
21 Dec 1863 — A group of brokers met to form the Open Board of Stock Brokers, a rival stock exchange located two doors from the NYSE.

Two doors down, eh? Talk about in your face. NYSE would merge with the Open Board in 1869.