The New York Stock Exchange is about to make a change to how it shares information with investors, after coming under fire from clients for how it handled stock market swings in August.
The Big Board will extend the length of time certain trading firms are able to see imbalances between buy and sell orders, according to people familiar with the matter.
NYSE was planning the tweak before August, according to two of the people, but the change has taken on added significance since markets went haywire.
Amid the August volatility, the NYSE was unable to quote prices on some stocks for as much as 20 minutes after regular trading began.
The change, expected to be effective in October, has particular relevance when the exchange invokes Rule 48 — which allows floor traders known as designated market makers not to provide price indications for stocks.
In other words when the market is whipsawing faster than human traders can keep up, they get a chance to catch up. When Rule 48 is invoked, it can take more than 30 minutes for a stock to open for trading, and during a period of that time investors on occasion have no sense of where the share price is going.
NYSE currently publishes order imbalances to those who subscribe to a market data feed from 8.30 am to 9.35 am.
That 9.35 am cutoff can prove problematic on mornings like August 24. More than 800 NYSE-listed securities still had no quotable price by 9:45 a.m. on August 24, according to data from BATS Global Markets, the second-largest US equity market and a rival to the NYSE.
It meant that trading firms couldn’t see a price for the stocks, and also had no idea of how the order imbalances might have changed after 9.35 am. Brokers have described it as equivalent to flying blind.
With the change, order imbalances will be published through market data feeds up until a stock opens.
It means that certain customers will be able to get a sense of where prices are going even if there isn’t an official price available.
The changes will kick in with an upgrade to NYSE’s trading platform technology which is called UTP 2.6.5, according to two of the people.
The changes come at a critical time for NYSE.
One of the NYSE’s biggest rivals, and some large trading firms, criticised the exchang for its handling of the market volatility in late August.
The former chairman and chief executive of the New York Stock Exchange, Dick Grasso, said last weekend meanwhile that the stock market is now unfair and should be reviewed.
He also took aim at exchanges selling data to some clients and not others.
“Creating an advantage to an institutional user or a particular type of trader that disadvantages the retail investor is bad for the country, bad for the markets, and bad for your business.”
It also faces new competition. IEX Group, the stock trading venue at the center of Michael Lewis’ book ‘Flash Boys’ has filed with the Securities and Exchange Commission to become a stock exchange.
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