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Capital Markets

NYSE cuts it close

The New York Stock Exchange needs to have its hybrid system ready before Reg NMS takes effect but it has only just completed Phase I. It might not have too much to worry about, though, as many other market participants are unprepared and a delay is widely expected.

Perhaps one of the reasons for New York’s stock exchanges’ apparent preoccupation with Europe is that is provides a welcome diversion from the headache of sorting out their own problems back home.

This April, Phase I of the NYSE’s eagerly awaited hybrid market system was launched. This will allow electronic access to 2,703 NYSE issues previously only traded by the NYSE on its floor.

Introduction of the system, originally designed for the execution of small retail orders, had been waiting for the SEC’s approval, which was finally given at the end of March.

The timing of Phase II, which is supposed to give specialists the ability to narrow spreads and electronically provide price improvement for the first time, is uncertain. The NYSE only says that details will be “forthcoming”.

The NYSE seems remarkably calm given that implementation of the SEC’s controversial Regulation National Market Structure, known as Reg NMS, is supposed to begin on June 29.

The NYSE will be in big trouble if its hybrid system is not ready in time for Reg NMS. This is because, if the hybrid system is not fully ready by the time the regulation comes into effect, the Big Board will be classed as a slow market, the quotes of which could be ignored.

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