Ray,

Does this mean that if I trade a stock listed on the NYSE and choose to route to ARCA (or any other ECN) instead of the NYSE that I will be paying a $0.0025 per share "penalty" for doing so?

by Chris on February 20, 2007 8:28 AM

Chris --

If YOU send your order to another market, you pay nothing to NYSE.

This fee applies only when NYSE routes your order to another market that executes it.

Hope that clears it up.

by Ray Pellecchia on February 20, 2007 8:36 AM

Just a quick question :--

This fee is also applicable if the order gets routed to other places under the "sweeping" feature of the new system?

by SP on February 20, 2007 9:09 AM

Whew.

Okay, my next question is what control does one have over the NYSE routing it away?

Does this happen automatically when one routes to NYSE but another market offers a better price?

Thanks.

by Chris on February 20, 2007 9:20 AM

SP --

Yes, the fee applies if your order gets routed away by NYSE and executed by another market as part of a sweep.

In case your next question is how to avoid that, the choices are using an Intermarket Sweep Order or a Reg. NMS Immediate or Cancel order. Both of these orders do not route to other markets, and both are part of Phase IV, which will be complete by March 5, when the new routing fee goes into effect.

Hope that helps. Thanks for writing.

by Ray Pellecchia on February 20, 2007 9:36 AM

Chris --

Yes, these fees would be incurred when you send an order to NYSE but we have to route it because there's a better price at top of book in another market.

To exercise control over where the order executes, you can use an Intermarket Sweep Order or a Reg. NMS Immediate or Cancel order.

As I mention in my response to SP, both of these orders do not route to other markets, and both are part of Phase IV, which will be complete by March 5, when the new routing fee goes into effect.

Thanks again for writing, Chris.

by Ray Pellecchia on February 20, 2007 9:39 AM

To be honest Ray, I personally feel the timing of this fee revision pretty coincidental..

Late September/ early October in 2006 just before the Phase III of hybrid was about to be implemented NYSE had told the market that there would be no extra fees for routing... If I remember right there was a notice on this matter...

Now as soon as the phase IV rolls out with the Intermarket Sweep/ IOC options there is a fees of the order of $.0025 for routing..

Pretty interesting I would say..

by SP on February 20, 2007 10:11 AM

Hey Ray:

The rule suggests that floor brokers won't pay the new routing fee, but that specialists -- along with the rest of us -- will pay. I'm hearing conflicting information on this point. Can you please clear things up? Thanks. J

by Jamie Selway on February 20, 2007 11:45 AM

Ray,

What happens in this scenario... The bid/ask on NYSE is .30 x .35

I do an Intermarket sweep order to buy up to .34. There are ARCA and ISLD's offered at .31 and .32.

Will my order cross the ISLD and post at .34 ... leaving a crossed market ?

Can you explain what happens in a cross situation when we instruct the orders not to route away ?

Will we automatically sweep the 31 and .32 and pay the routing fee even though we choose not too ?

Please elaborate on this scenario... thx

David

by David on February 20, 2007 12:23 PM

Hi Ray,

Thanks for all your hard work on the blog. We appreciate it!

Regarding routing away, will orders be routed away if the bid (offer) somewhere is higher (lower), but not displayed? For example:

The inside offer at NYSE is 0.20.
The displayed offer at ISLD is 0.21, but ISLD has a non-displayed offer at 0.19. Does a market buy posted to NYSE go to ISLD in this case?

Thanks,
Annie

by Annie on February 20, 2007 2:39 PM

I guess now if a customer chooses NOT to route to another market the specialist will have the opportunity to price improve or match.

by tony dey on February 20, 2007 5:57 PM

Annie -- The buy order does NOT go to ISLD, because we are NOT required to route to NON-displayed interest in other markets, even at top of book.

By the same token, non-displayed (reserve) interest at NYSE is eligible to participate in sweeps and other executions, but is not protected from being traded through by other markets.

Thanks for writing, Annie!

by Ray Pellecchia on February 21, 2007 7:45 AM

Jamie -- My understanding is that specialists are not exempt from the fee.

Thanks for checking in!

by Ray Pellecchia on February 21, 2007 7:46 AM

David --

If you send the Intermarket Sweep Order to NYSE, nothing happens, because there is no marketable interest to trade with at NYSE.

If you send to NYSE Arca, they trade at 31 and then cancel the balance - no routing. If you send it to Island they trade at 32 and no routing.

In the last two scenarios, as the customer sending the ISO, you're responsible for meeting your Reg. NMS obligations, not the market center.

Thanks for writing, David!

by Ray Pellecchia on February 21, 2007 7:50 AM

Ray,

As a follow-up to my earlier question in this thread, is there any concern at the NYSE that people will find that it's better to send their market orders directly to the ECNs? Given the relative thinness at the inside prices on Hybrid, with Reg NMS route-aways are going to be relatively common; why wouldn't we just route to the ECN directly, thereby increasing our fill rate (since the order will arrive faster, not having gone through NYSE's systems), and possibly hitting some of the non-displayed size at a better price?

It seems like the lack of non-displayed order types for general market (i.e., not floor brokers) is a critical difference between Hybrid and the ECNs, and with the specialists unable or unwilling to provide the "dark" liquidity, Hybrid has a real problem... or am I missing something?

by Annie on February 21, 2007 9:40 AM

Annie -- Thanks for the thoughtful question. We're of course concerned with making sure NYSE remains the most compelling venue for trading our listed issues.

I don't actually agree that NMS will bring an increase in routing away, but I guess it remains to be seen. An important factor in that equation is that NYSE posts the best price more than 87 percent of the time.

We also have far higher fill rates than other markets; the lowest fees and all-in transaction costs; and a growing variety of order types, though I acknowledge we don't currently offer reserve features other than to floor brokers, as you point out.

Again, I believe we'll continue to make changes to keep our market the most competitive.

by Ray Pellecchia on February 21, 2007 12:01 PM

I don't understand the comment about "meeting my REG NMS" responsibilities"

The market moves so fast and inconsistent now in the hybrid... I can't expect to meet my obligations of REG NMS all the time.

Also who is to prevent someone from just sending orders without meeting REG NMS obligations ?

I want to know what happens when the obligation is not met... and we cross the market. Can you elaborate on this ?

Thanks,

David

by david on February 22, 2007 8:45 AM

David -- When you send an Intermarket Sweep Order, you're obliged by Reg. NMS to send an order to satisfy any better price at top of book in another market.

Firms' compliance with Reg. NMS is subject to oversight by regulators in the individual markets, and the SEC.

Chapter 4 in our training booklet might clarify this.

Hope that helps. Thanks for writing, David!

by Ray Pellecchia on February 22, 2007 4:59 PM

Ray,

If I am offering on INET and the NYSE routes to me, will I still get my liquidity rebate from INET? Who will pay it? Is this what the new fee is for?

Thanks

by keith on March 2, 2007 10:26 AM

if i route out an order on arca, for example, and the order executes against island. i'm not charged this extra fee, correct? in order to incur the extra fee, i assume that the only time a fee is charged is when the route out is executed against ny. are these correct assumptions? thanks

by josh on March 2, 2007 2:39 PM

Keith --

My understanding is that you still get your rebate from Inet. The NYSE routing fee is only for orders that are sent to NYSE originally, which we must route to a better price in another market and that gets executed in that other market. The NYSE routing fee is charged to the firm that sent the order to us, not the firm that posted the contra side in the away market.

Hope that helps, Keith. Thanks for writing!

by Ray Pellecchia on March 6, 2007 10:30 PM

Josh --

You're correct on the first question; Arca charges its own routing fee. In that example, there would be no NYSE routing fee.

Your other assumption is incorrect; if another market routes to NYSE and we execute, we charge our standard transaction fee, not the routing fee.

The only time we charge the routing fee is when NYSE routes an order to another market that executes it.

Hope that clarifies things, Josh. Thanks for writing!

by Ray Pellecchia on March 6, 2007 10:48 PM

Could you clarify if, when NYSE routes away on my behalf, that NYSE will pay any liquidity-removing fee that is charged by the market center receiving my routed order? Or will I have to pay that fee in addition to the routing fee that NYSE is charging.

by Sam on March 14, 2007 12:44 PM

Sam -- Yes, NYSE will pay the fee charged by the market that receives and executes your order. You would pay only one fee (our routing fee), which is higher than our own transaction fee because our competitors' "take" fees are so much higher than ours.

Thanks for writing, Sam!

by Ray Pellecchia on March 14, 2007 4:06 PM

Ray,

Can you please verify that the transaction costs below are still correct? Also, are they the same for licensed and non-licensed traders? Thank you.

NYSE executed trades $0.000275 per share

NYSE routed out $0.0025 per share

by Jeff on September 6, 2007 3:09 PM

Jeff -- Yes, those numbers are current.

Here's the link to the fee schedule: http://www.nyse.com/pdfs/2007pricelist.pdf
Any changes are always announced.

I see on it no distinction among types of traders; these are the fees we charge members and member firms, one of which you have to be (or come through) to trade on NYSE.

Hope that answers it. Thanks for writing!

by Ray Pellecchia on September 6, 2007 7:01 PM