NYSE Puts Block Crosses into Floor Traders Handheld Devices
February 20, 2013
The handheld device is the latest block crossing venue.
The New York Stock Exchange is taking the wraps off a four-month-old system that allows floor traders to work trades in blocks of 10,000 shares or more, using electronic broking devices.
“The objective here is to provide the trading floor community with a robust and viable tool that will allow them to facilitate primary market crosses on behalf of their customers,’’ said Michael Rutigliano, senior vice president of floor trading operations at the exchange.
The eBroker devices will be programmed to make sure that all block crosses comply with Regulation National Market System Rules. They will also automatically scan incoming quotes for matches with other blocks.
"With the speed of markets in quotes, what this tool allows is for the system to take care of quote minding on floor traders’ behalf,'' Rutigliano said.
Since October, floor traders have executed traders involving roughly 100 million shares of stock, he said. The average trade size has been about 55,000 shares.
By comparison, the largest dark pool, Credit Suisse’s Crossfinder, handles about 102 million shares on an average day, according to Rosenblatt Securities. A dark pool that specializes in block trades, Liquidnet, typically averages about 10 million shares a day. Liquidnet’s average trade size in December was just shy of 42,000 shares.
"That is a great competitive rule,’’ said Joseph Cangemi, head of U.S. equity trading at technology supplier Convergex, of the NYSE’s “cross function” rule. “It is a rule that allows for them to have in place the ability to compete for the flow that is printed on the Trade Reporting Facility. That is a very very good step in the right direction."
Brokers and operators of alternative trading systems, such as dark pools, report details of trades that occur off the national exchanges to the Trade Reporting Facility, maintained by the Financial Industry Regulatory Authority.
"I think it will be very helpful, to facilitate orders in that way,’’ said floor trader Doreen Mogavero, president and chief executive of Mogavero & Lee, based in New York.
Mogavero could not estimate how often she expected to execute a block cross using the eBroker devices. But, she said, "I think it will be useful for us. There are times when floor traders need the capability."
The NYSE system will validate when the trade can take place and replaces a largely manual process.
"I think the cross function is a perfect blend of technology and trading floor expertise in support of block crosses," said Rutigliano.