Hi Ray, With respect to Hybrid stocks, will the ARCA "ECN" now automatically route to the NYSE for instant execution (assuming NYSE has the best price at the time)? Thanks...!

by Robert on December 20, 2006 11:34 PM

Ray,

It seems that from most everyone on this board... no one really seems to like this new hybrid system... and it has nothing to do with "getting used to a new system" as you have been saying for months.

The reason for the displeasure and debacle of the NYSE Hybrid is because of 2 reasons.

The first reason is that there is "no quality without consistency". Whether you like McDonalds or not, the reason it is the most popular restaurant in the world, is because when you go to do business there... you pretty much know what you are going to get. Well when I go put out a order in the hybrid... SURPRISE !!!!

Which brings me to the 2nd reason hybrid is bad. "Customers don't mind problems, but they hate surprises!!"
Well, I can speak for the majority of people who are trading hybrid... or at lease those who are posting their displeasure on this board... that everytime an order goes out you are always SURPISED by the outcome.
I know that if there was a problem, such as a "news story", I would understand that there might be a problem with my fill. But if I go market now... the NYSE can give me a print .30-.50 away... the NYSE might never move his quote... give me the bad fill... and then print right back where he was. The problem is there is no consistency and then you get hit for that SURPRISE !!!!

I hope you can understand the frustration of the hybrid... but what makes it even worse is that quotes are never real. I know there is an element of gaming, when posting quotes... but the algorithms have gotten ridiculous. I rememeber just a short time ago... If I posted size on one side of the market and then cxld it, and put size on the other side and cxld it to influence a stocks movement... I would get a letter from the SEC for "spoofing" and I would have to explain the logic as to why I was doing such a scheme. Now the scheme is an encouraged and welcomed practice in the marketplace.

The only ones who like the hybrid are the large customers who have order flow, since they can manipulate where the stock will go. As a "for profit" company... I understand that you had to take care of those who generate the most revenue... that is just good business sense. What you will find as I have is that the large customer can move the stock all he wants... but eventually he wont have anybody to take the other side. The black boxes have already started to game these guys... to back away... use ECN's and spoof eveyone to make the NYSE the disaster it is today !!!!

I hope you reconsider your hybrid system... but as for me... rather than complain...I have given most of my volume to Burger King.... I mean Nasdaq !!!!!!

by David on December 22, 2006 6:23 AM

Robert -- Arca already auto-routes to better prices in all the stocks it trades (not just Hybrid NYSE-listed stocks).

BTW, I wanted to also note that it's now NYSE Arca, and it's no longer an ECN -- it's an exchange.

Thanks for writing, Robert!

by Ray Pellecchia on December 22, 2006 9:05 AM

Everything I have read and heard told me NYSE is already routing to top of books to protect best price. based on this post it seems that this is not happing with SDOT orders until Phase III. Basically, no market center is protecting best price in Hybrid stocks at this point including NYSE correct?

by Jason on December 27, 2006 2:45 PM

Jason --

Let me try to clarify: In Phase III Hybrid Market issues only, NYSE is indeed auto-routing to better prices at top of book in other markets. Other markets might not be doing the same.

In stocks that haven't been activated in Phase III yet, the old trade-through rule still applies. That rule was not the most effective at protecting best price, which is in part why the SEC developed Reg. NMS.

I hope that clears it up, Jason. Thanks for writing!

by Ray Pellecchia on December 29, 2006 2:59 PM