Ray, What about price restrictions? Will people be restricted from entering Direct+ orders more than a certain amount away from the last price?

Bob -- There will be no such restriction. Thanks for writing. -- RP

by Bob on December 12, 2005 4:57 PM

Your hybrid market product seems geared toward the end user (i.e. the customer) within the Auction market a fast market (where negotiation is not a necessary element). What is the need for a specialist or a floor broker (the specialist system is there to keep a fair and orderly market, but now not able to interact with market orders as a profit center) an agency pass through? And if they are no longer a profit center will they not walk away from the business, hence the end customer and the market will lose a circuit breaker that historically has been there in times of volatility?

Mr. Vanderoef -- Thanks for writing; that's a very thoughtful question. Some thoughts in response:

The Hybrid Market is designed to give new tools and capabilities to specialists and brokers, not just customers. We agree that specialists' and brokers' participation is absolutely critical. That's why we're giving them the ability to perform their roles in the "fast" market as well as the auction. The Specialist API and the brokers' new e-Quote tool, along with other new tools, will enable specialists and brokers to participate and provide value in both the electronic and auction components of the market. So specialists and brokers will be part of -- not excluded from -- the fast market. We would argue that these new tools will make them even better at their jobs: more efficient, productive and effective.

On your point about volatility, it's important to note, too, that we've built new controls (Liquidity Replenishment Points) that will be triggered by wide price movements resulting from automatic executions and sweeps over a short period of time. These curbs will temporarily convert the market to "slow" or auction market-only mode, giving customers, floor brokers and specialists an opportunity to respond to the stock's movement.

While we anticipate the percentage of automated trading will grow, some stocks with deep natural liquidity will have a highly electronic profile, others will have a more equal blend of auction and automated representation, and still others will depend on a significant auction component to minimize volatility. We anticipate that the trading floor's capital and judgment will continue to be important across all stocks, particularly in situations such as order imbalances, news events and market openings and closings. -- RP

by Eric P. Vanderoef on December 23, 2005 11:10 AM