April 8, 2005
Please consider this as an addendum to my earlier comment on the NYSEs hybrid market proposal.
In attending this weeks April 6 open meeting of the Commission, I could not help but be struck by several points made by the Commissioners that ought to similarly inform the Commissions consideration of the NYSEs proposed hybrid market.
In discussing the rule changes developed by the Division of Investment Management, several Commissioners pointed out that the SEC staffs original proposal had to be re-drafted to put it into plain English so that the public could more readily understand it. Commissioners spoke approvingly of the need for such plain English construction. I would urge the Commission to insist upon the NYSEs redrafting of its hybrid market proposal in plain English as per my suggestions in my earlier comment.
Those Commissioners supporting the NMS proposal spoke of the proposals benefits in encouraging the placement of limit orders and in protecting such limit orders as are entered. These are very important public policy considerations, and they bear significantly on the NYSEs proposed hybrid market.
As I explained in my earlier comment, the NYSEs proposed broker agency interest file is actually a hidden limit order book consisting of floor broker go along parity orders that would deny executions to orders entered earlier in time on the public limit order book, or would result in partial executions of orders that would otherwise be executed in their entirety. Clearly, the effect of the broker agency interest file is to disincent the placement of orders on the NYSEs public limit order book, and to deny such orders as are placed the benefits of price/time execution priority that exist in every other marketplace of which I am aware. This is ugly stuff, a most unsavory accommodation of NYSE floor traders at the expense of the broad investing public.
The NYSEs proposal simply cannot be squared with the Commissioners views as expressed at the April 6 open meeting about protecting public limit orders. The Commission must insist upon the protection of public limit orders on the NYSE, and must demand that the NYSE reform its proposal such that orders in the broker agency interest file, the hidden go along limit order book, be deemed executable only after the fully disclosed, transparent public limit orders at that price are fully executed.
Very truly yours,
For some reason, the SECs software seems to delete the apostrophe denoting a possessive. Be assured, they were inserted as appropriate