The New York Stock Exchange (NYSE) has decided to end its one-year institutional liquidity pilot after initially proposing it in November 2013, according to filings with the Securities and Exchange Commission (SEC).
At the time of the proposed rule change, NYSE officials stated that the pilot would target the size discovery mechanism through a balanced set of requirements and incentives.
The pilot relied on the interaction of two new order types – institutional liquidity order (ILO) and oversize liquidity order (OLO). The non-displayed ILOs expressed institutional interest in trades that consisted of at least 5,000 shares or $50,000 in market value. An OLO expressed an order of at least 500 shares seeking to interact with ILOs and were identified with a liquidity indicator that was disseminated through the consolidated tape.
NYSE executives had hoped that the pilot would lead to fewer traders ‘pinging’ the liquidity pool for price discovery. It also expected the scheme would attract more institutional block trades to the lit market.
NYSE has yet to disclose why it has terminated the pilot early.