Hello my fine options friends! I am writing you to give you the latest skinny on our Complex Order Book, coming to your favorite Options Trading Platform the first part of August 2008.

Everything you love about NYSE Arca Options will be in place for complex order trading—speed, transparency, throughput—with the addition of extremely low-latency trading between our very liquid equity and options platforms (it is SO FAST!), which will supercharge your execution opportunities for option/equity trades — and you’ll enjoy the usual lightning-fast order handling for options-only complex orders that you know and love as a participant in our single- leg markets.

Here’s the scoop:

• You can send up to 5 legs in any complex order, which means up to 5 option legs or up to 4 option legs and 1 equity leg.

• NYSE Arca offers riskless execution for options-only and options with stock complex orders, by matching complex orders within the complex order book OR by interacting with the liquid simple markets on both the options and equities platforms.

• Complex orders can be priced in penny increments.

• Marketable complex orders will trade immediately, with no auction or delay in processing.

• You can send in complex orders via FIX or ArcaDirect (specs for both are located on the website).

• Complex order will always receive price improvement, if available from resting complex orders or the simple market legs.

• You can send delta neutral as well as buy write orders.

• A new ArcaBook subscription will be available for the complex order book.
o Top of Book Messages
o New Instrument Messages

• In order to identify and organize complex instruments and orders, NYSE Arca will disseminate Complex FAST symbols via ArcaBook.
o FAST Symbol will be created for the order immediately upon receipt from FIX if the instrument does not already exist.
o An ArcaBook message will be sent that contains the leg definitions of the complex order along with the FAST symbol.
o Once defined, any further activity in the instrument will be broadcast using the FAST symbol only.
o These FAST symbols will be available to ArcaBook users whenever they subscribe, not only at start of day.

If you have any questions regarding our upcoming complex order book, feel free to drop me a line. I’ll talk your ear off if you give me the chance! Vive la Complex!

Was busy having fun this afternoon so a bit belatedly I’m passing along this press release, as I know pricing news is always of interest to you: NYSE Arca Announces New Equities Pricing, Effective May 1. Excerpt:

NYSE Arca…today announced new transaction pricing, effective May 1, 2008, that will feature rebates for non-displayed orders and a new “post/take” rate combination for active customers in NYSE-listed (Tape A) securities. These changes follow recent price changes on April 1, 2008, when NYSE Arca introduced highly competitive fees for active traders in NASDAQ-listed (Tape C) securities as well as better rates in NYSE-listed securities and on NYSE Arca Options.

“The new NYSE Arca pricing provides even more benefits to high volume customers, and the MPL order type is a useful alternative to dark pools,” said Lawrence Leibowitz, Group Executive Vice President, U.S. Execution and Global Technology. “In addition to anonymity and price improvement, MPLs offer better fill rates due to unique order interaction on one of the largest exchange liquidity pools. Coupled with attractive rebates, this provides significant advantages over dark pools.”

If you need more detail, the press release has a complete chart of the new price schedule.

Traders magazine has a survey of buyside traders, pointing to the problems of market fragmentation. Excerpt:

According to the survey, which included 126 buyside firms, slower fills and inferior prices are the major trading issues associated with today’s fragmented market.

At present, the buyside has so many execution venues–exchanges, ECNs and, particularly, dark pools–that their number makes it difficult to reach them all. And having so many venues reduces the amount of information available and makes it harder to trade blocks.

Of particular interest to me was the question, “If you believe fragmentation is a problem, describe the best solution.” The answers:

Use more algorithms, smart-order-routing and DMA — 31%
Develop better connectivity (between dark pools and exchanges/ECNs) — 49%
More regulation — 5%
Use high-touch sales trading — 12%
Use capital — 11%
Other — 5%

There’s a diversity of opinion there, but the overwhelming favorite is better connectivity between exchanges and dark pools, which is exactly what we’re trying to do with our new NYSE Arca dark-routing initiative, MatchPoint, our upcoming joint venture with BIDS, and in Europe, SmartPool.

Exchanges are natural aggregators of liquidity, and we aim to help customers deal with fragmentation by re-aggregating dispersed liquidity. Much more to come on this front.

Hope you had a good Wednesday, folks. Today was an important and solemn day in our history:

Today in NYSE History
09 April 1968 — The NYSE was closed for the funeral of the Rev. Dr. Martin Luther King, Jr.

Traders magazine has a survey of buyside traders, pointing to the problems of market fragmentation. Excerpt:

According to the survey, which included 126 buyside firms, slower fills and inferior prices are the major trading issues associated with today’s fragmented market.

At present, the buyside has so many execution venues–exchanges, ECNs and, particularly, dark pools–that their number makes it difficult to reach them all. And having so many venues reduces the amount of information available and makes it harder to trade blocks.

Of particular interest to me was the question, “If you believe fragmentation is a problem, describe the best solution.” The answers:

Use more algorithms, smart-order-routing and DMA — 31%
Develop better connectivity (between dark pools and exchanges/ECNs) — 49%
More regulation — 5%
Use high-touch sales trading — 12%
Use capital — 11%
Other — 5%

There’s a diversity of opinion there, but the overwhelming favorite is better connectivity between exchanges and dark pools, which is exactly what we’re trying to do with our new NYSE Arca dark-routing initiative, MatchPoint, our upcoming joint venture with BIDS, and in Europe, SmartPool.

Exchanges are natural aggregators of liquidity, and we aim to help customers deal with fragmentation by re-aggregating dispersed liquidity. Much more to come on this front.

Hope you had a good Wednesday, folks. Today was an important and solemn day in our history:

Today in NYSE History
09 April 1968 — The NYSE was closed for the funeral of the Rev. Dr. Martin Luther King, Jr.

From the press release, issued earlier today:

NYSE Arca Equities Fee Schedule Reductions
In Nasdaq-listed (Tape C) securities (including ETFs), the new NYSE Arca equities fee schedule provides for increased rebates, decreased “take” fees and reduced routing fees for large liquidity providers based on monthly average daily share volumes. In particular:

· A rebate of $0.0026 per share for orders that provide liquidity and a fee of $0.00245 per share for orders that take liquidity will apply for customers who transact average daily share volume per month greater than 60 million shares in total, including the provision of liquidity of more than 30 million average daily shares. The routing fee for orders that meet this volume threshold will be $0.0026 per share for orders routed away and executed by another market center or participant.

· A rebate of $0.0025 per share for orders that provide liquidity and a fee of $0.0026 per share for orders that take liquidity will apply for customers who transact average daily share volume per month greater than 30 million shares in total, including the provision of liquidity of more than 15 million average daily shares. The routing fee for orders that meet this volume threshold will be $0.0026 per share for orders routed away and executed by another market center or participant.

· All other customers will receive a rebate of $0.0020 per share for orders that provide liquidity, a fee of $0.0026 per share for orders that take liquidity, and a routing fee of $0.0035 per share for orders routed away and executed by another market center or participant.

For NYSE-listed (Tape A) securities, the new NYSE Arca equities fee schedule introduces an increased rebate of $0.0028 per share for orders that provide liquidity if the liquidity provider transacts an average daily share of providing volume per month greater than 30 million on NYSE Arca.

Pricing remains unchanged on the New York Stock Exchange (NYSE) in NYSE-listed securities (Tape A) and for trading in all Tape B securities (including ETFs). The NYSE continues to offer the most attractive take fee in NYSE-listed securities of $0.0008 per share for all customers.
Firms interested in advertising quotes in their own names can do so using NYSE Arca’s attribution capability, which is available through major vendors and service bureaus such as Fidessa, Lava Trading and SunGard BRASS.

NYSE Arca Option Fee Schedule Reductions
NYSE Arca Options will modify the “post/take” fee structure for electronic executions in all penny pilot issues, effectively lowering the “take” fee for all customers as well as providing a higher market maker rebate on incremental volume above certain liquidity provision levels.

NYSE Arca Options will reduce the liquidity “take” rate from $0.50 to $0.45 per contract for all market participants. The NYSE Arca trading system will automatically route orders to other exchanges if the national best bid and offer (NBBO) is not available on NYSE Arca. Routed orders executed at other exchanges will only be charged the reduced $0.45 “take” rate per contract. NYSE Arca Options provides a powerful combination with the lowest take fee together with deep liquidity and private smart-order routing capabilities that bring faster executions and fulfill best execution obligations.

NYSE Arca Options will provide additional incentives to NYSE Arca Market Makers for posting immediate or ultimately executed liquidity. Market Makers that achieve specific thresholds for posted, executed volume in penny pilot issues will receive additional credits.
Execution type Rebate per contract for posting “Take/Route” fee per contract
Customer $0.25 $0.45
Broker Dealer $0.25 $0.45
Market Maker $0.30 $0.45
Market Maker $0.31 for incremental volume over 1 million contracts/month $0.45
Market Maker $0.35 for incremental volume over 5 million contracts/month $0.45

Hope that’s a bit of good news on a day when the Yanks’ Opening Day got rained out until tomorrow. Was going to watch it in my office today and had to work instead. Can you imagine?

Today in NYSE History
31 Mar 1910 — The NYSE’s Unlisted Securities Department was abolished and its stocks - mostly industrial companies - were transferred to the regular list.

From the press release, issued earlier today:

NYSE Arca Equities Fee Schedule Reductions
In Nasdaq-listed (Tape C) securities (including ETFs), the new NYSE Arca equities fee schedule provides for increased rebates, decreased “take” fees and reduced routing fees for large liquidity providers based on monthly average daily share volumes. In particular:

· A rebate of $0.0026 per share for orders that provide liquidity and a fee of $0.00245 per share for orders that take liquidity will apply for customers who transact average daily share volume per month greater than 60 million shares in total, including the provision of liquidity of more than 30 million average daily shares. The routing fee for orders that meet this volume threshold will be $0.0026 per share for orders routed away and executed by another market center or participant.

· A rebate of $0.0025 per share for orders that provide liquidity and a fee of $0.0026 per share for orders that take liquidity will apply for customers who transact average daily share volume per month greater than 30 million shares in total, including the provision of liquidity of more than 15 million average daily shares. The routing fee for orders that meet this volume threshold will be $0.0026 per share for orders routed away and executed by another market center or participant.

· All other customers will receive a rebate of $0.0020 per share for orders that provide liquidity, a fee of $0.0026 per share for orders that take liquidity, and a routing fee of $0.0035 per share for orders routed away and executed by another market center or participant.

For NYSE-listed (Tape A) securities, the new NYSE Arca equities fee schedule introduces an increased rebate of $0.0028 per share for orders that provide liquidity if the liquidity provider transacts an average daily share of providing volume per month greater than 30 million on NYSE Arca.

Pricing remains unchanged on the New York Stock Exchange (NYSE) in NYSE-listed securities (Tape A) and for trading in all Tape B securities (including ETFs). The NYSE continues to offer the most attractive take fee in NYSE-listed securities of $0.0008 per share for all customers.
Firms interested in advertising quotes in their own names can do so using NYSE Arca’s attribution capability, which is available through major vendors and service bureaus such as Fidessa, Lava Trading and SunGard BRASS.

NYSE Arca Option Fee Schedule Reductions
NYSE Arca Options will modify the “post/take” fee structure for electronic executions in all penny pilot issues, effectively lowering the “take” fee for all customers as well as providing a higher market maker rebate on incremental volume above certain liquidity provision levels.

NYSE Arca Options will reduce the liquidity “take” rate from $0.50 to $0.45 per contract for all market participants. The NYSE Arca trading system will automatically route orders to other exchanges if the national best bid and offer (NBBO) is not available on NYSE Arca. Routed orders executed at other exchanges will only be charged the reduced $0.45 “take” rate per contract. NYSE Arca Options provides a powerful combination with the lowest take fee together with deep liquidity and private smart-order routing capabilities that bring faster executions and fulfill best execution obligations.

NYSE Arca Options will provide additional incentives to NYSE Arca Market Makers for posting immediate or ultimately executed liquidity. Market Makers that achieve specific thresholds for posted, executed volume in penny pilot issues will receive additional credits.
Execution type Rebate per contract for posting “Take/Route” fee per contract
Customer $0.25 $0.45
Broker Dealer $0.25 $0.45
Market Maker $0.30 $0.45
Market Maker $0.31 for incremental volume over 1 million contracts/month $0.45
Market Maker $0.35 for incremental volume over 5 million contracts/month $0.45

Hope that’s a bit of good news on a day when the Yanks’ Opening Day got rained out until tomorrow. Was going to watch it in my office today and had to work instead. Can you imagine?

Today in NYSE History
31 Mar 1910 — The NYSE’s Unlisted Securities Department was abolished and its stocks - mostly industrial companies - were transferred to the regular list.

Here is the media coverage to date from our announcement earlier this week about NYSE Arca’s new initiative to provide clients with routing to a pool or “cloud” of undisplayed liquidity from diverse sources.

Cloud is not the official name, and in fact the initiative doesn’t really have a name, but I like the word because in this case, it fits. Orders that don’t get matched within NYSE Arca are routed through this cloud of dark indications on their way to going out to another market. If they find a match in the cloud, they save time in terms of latency and have an opportunity to get price improvement. They also have a better opportunity to get filled. So in terms of liquidity, I hope this dark cloud is a rainmaker for you.

Forgive me.

Anyway, this is new for us, so I offer up these clips in case you want to read more on it. No PR guy worth his salt should ever admit to a favorite article or reporter, but I have to confess, the competitive part of me (OK, all of me) is a little partial toward the headline on the first piece.

Arca Beats Nasdaq to Dark Pools (TradersMagazine.com) — Excerpt: “According to [Senior VP Christine] Sandler, the benefit for customers is additional liquidity, better prices and a method of getting around the fragmentation of non-displayed flow that could cause firms to miss liquidity in the market. She noted that the electronic cloud could provide customers with additional liquidity beyond what is displayed or available in the markets, or additional liquidity priced better than the NBBO.”

NYSE Arca Will Connect to Brokers’ `Dark Pools’ to Cut Costs (Bloomberg.com; no link available) Excerpt: “‘It was our preference to route out to a network of our clients,’ Christine Sandler, NYSE Euronext’s head of North American sales, said in an interview. ‘And this gives our clients the ability to access additional points of liquidity.’”

NYSE Arca Routes to Dark Liquidity Pools (SecuritiesIndustryNews.com) Excerpt — “[Sang]
Lee likened the strategy to that of Archipelago…’in which advance order-routing capability to other ECNs played a crucial role in increasing its overall internal matching rates.’ The NYSE Arca service will play ‘gatekeeper to other liquidity pools and, if done correctly, should help Arca attract additional order flow,’ he added.”

NYSE Euronext launches link to dark pools (FinancialNewsOnline.com) Excerpt: “The launch came a week after a market research report said the proliferation of US trading systems has created demand for better access to trading venues.”

A rough week in the market, but at least it’s over. Until Monday, that is. Try to have a good weekend.

On the lighter side: American railroad engineer Casey Jones (1863-1900) was born On This Day (NYTimes.com) . And I always thought he was just a song character invented by the Grateful Dead! Silly me.

From an NYSE Euronext press release just out:

NYSE Euronext (NYSE Euronext: NYX) today announced that NYSE Arca launched a routing and price improvement service that is the first of its kind from an exchange: offering clients access to non-displayed liquidity. Through the addition of routing to participating broker-dealers and Alternative Trading Systems (ATSs), investors now have unprecedented access to non-displayed quotes and the industry’s largest aggregation of liquidity by an exchange.

Trading interest from these venues will be included in the NYSE Arca routing algorithm, providing customers with a variety of benefits, including:
• Increased potential for filling orders;
• Potential for price improvement;
• Extraordinary access to liquidity with 29 confirmed participants, comprising the largest collection of non-displayed liquidity pools available in the market;
• Access to 3 1/2 times the number of routing destinations offered by the nearest competitor.

“Providing easy and efficient access to these diverse, non-displayed liquidity venues is an extension of our commitment to offer the greatest array of services to our clients,” said Lawrence Leibowitz, Group Executive Vice President and Head of U.S. Markets and Global Technology, NYSE Euronext. “By linking more market participants than any other exchange, we are reducing fragmentation and offering our clients greater speed, better prices and equality of access to liquidity.”

Happy Wednesday, folks. Sorry the posting here has been so sparse lately; day job has had me jammed with things like the above announcement, which I hope is good news for those of you struggling with fragmentation. Hope to get back to more frequent posting very soon.

In the meantime…

Today in NYSE History
12 March 1825 — The NYSE rented a room to conduct its daily trading sessions from Mr. John Warren, a member of the Exchange.

An update: NYSE Arca traded 2.8 billion shares yesterday, a new record. ArcaBook recorded an all-time high 670 million updates. Arca processed 47.4 million orders, believed to also be a record.

Must have been another sign of a market top, no?

Original post from yesterday:

I know this is nowhere as newsworthy as Monday’s swoon in markets around the world. Or yesterday’s drop, bounce, drop, bounce, and ultimately, drop. Or today’s decline, rally, decline, rally, decline, and session-ending rally. Or any other words for the recent market moves that you can think of. No, not near as newsworthy as all that.

But.

Apart from all that activity, the last three days here (including last Friday) saw successive records set each day in message traffic coursing through our electronic systems. Not headline-making stuff. But when the market is moving, the last thing you need is for the market itself to break, technologically speaking. That’s why we spent more than $25 million last year alone to increase our systems’ capacity.

Today’s share volume, which was well north of 2.8 billion shares on the NYSE floor alone last I looked — looking like perhaps our second-highest ever — is just the tip of the iceberg, the piece you see and can get your head around.

While I was on the floor just before the close today, a screen at our operations center was reflecting 16 system records and the numbers were still spinning like a speedometer in a Bugs Bunny cartoon. For the third consecutive session, we had record numbers of orders (187,232,513); quotes (both from here alone, 83,009,863; and consolidated, 476,750,885) and reports (200,398,251).

Not to bore you with a lot of statistics, but let me just pick out one central system — our Common Message Switch (CMS) — and tell you that we broke records multiple times today, and those records had been set yesterday, which themselves topped records set on Friday.

Measured over a peak 30-second period today, CMS averaged 40,429.1 messages per second. During a 1-minute period, it was 36,894.0 messages per second; and over a 5-minute stretch, 32,534.3 messages per second.

For an old-timer like me, I never thought I’d see numbers like these. And for those outside of these four walls, like I said, this is all remarkable mostly for what *didn’t* happen. Our goal is to be there when you need us, to get you those reports and cancels fast enough that you can do something else, put up those quotes quick enough that you can get those best prices, here or (perish the thought!) away.

Most of all, to all those customers sending us all those millions of messages, let me say thank you. Keep ‘em coming!