The New York Stock Exchange (NYSE) has started introducing execution algorithms for its floor brokers, which they will be able to access from their hand-held order management devices. The exchange believes this will put floor brokers on a level playing field with other users, and improve their competitiveness.
“It’s about trying to allow floor brokers to be as competitive as possible with all other market participants on behalf of their customers,” Michael Rutigliano, vice president, broker liaison at NYSE, told theTRADEnews.com. “When you consider that every market participant has access to algorithmic-type orders, I think it made perfect sense to provide that same ability to floor brokers.”
Floor brokers are exchange members that execute orders on the floor of the exchange on behalf of clients. According to Rutigliano, the new algorithms will boost floor brokers’ order delivery speed. “Our guys are pretty good but they can‘t send the orders in with the same tenacity as an electronic program can,” he said. “The ability to send orders in that manner and to have those orders competing at the national best bid and offer makes them very competitive.”
Floor brokers will be able to route all or part of a customer order to an external algorithmic engine from their hand-held order management devices. The algorithms have been developed by trading technology firm Pragma Financial Systems and have been designed specifically for the NYSE point of sale.
Unlike execution algorithms external to NYSE, the floor broker algorithms will trade on parity, which means the broker can match every trade. The algorithms are customisable and can be used at the same time as brokers’ current non-algorithmic execution and quoting strategies.
The new algorithms will offer brokers a combination of percentage and pricing strategies. “They will allow brokers to maintain a percentage profile in a stock or utilise more of a price-sensitive strategy, so that the algorithm is more or less aggressive,” explained Rutigliano.
The exchange is aiming for a speedy implementation of the algorithms. “I expect in a week or so we will begin a much more aggressive roll-out, and we would like to get these algorithms on every broker’s hand-held device within the next two or three weeks,” said Rutigliano.
NYSE also announced that it has introduced BlockTalk, a real-time messaging system that allows floor brokers to hunt for large pools of liquidity using their hand-held devices. Rutigliano believes this new system, implemented last month, will also improve floor brokers’ efficiency. “The one thing customers continually tell us is how difficult it is for them to find true block-size liquidity,” he said. “Many institutional clients want to try to find liquidity pools. We have more block volume on our floor than any other place. The ability now for brokers to be able to contribute to that is going to be very beneficial for their customers and themselves.”