Floor Brokers Leverage Technology02.16.2012
Handheld software boosts ability to accept orders electronically.
Floor brokers on the New York Stock Exchange are leveraging technology to harness NYSE’s parity allocation model, which enables them and their customers to boost execution efficiency.
Recent enhancements to NYSE broker technology enable floor brokers to accept large numbers of orders electronically and efficiently manage and represent them in the marketplace.
“Due to recent changes in the e-Broker Handheld software and the trading infrastructure database, floor brokers now can send orders into the market with the necessary identifiers to be eligible for parity in an electronic sense,” Keith Bliss, senior vice president at Cuttone & Co., told Markets Media.
The notion of parity in an execution sense is unique to the NYSE.
“Trading on the NYSE has always been governed by the ‘three P’s’ – Parity, Price, and Precedence,” said Bliss.
There are three trading constituency groups that are on parity with one another when an execution occurs in the NYSE: the Designated Market Maker (DMM); the Floor Broker, and everyone else in the public order book, which is comprised of all DOT orders and any orders supplied by the Supplemental Liquidity Providers (SLPs).
“When an execution occurs, those three groups get an equal split of the executed amount,” said Bliss. “So, in the parity allocation model of the NYSE there are advantages to using a floor broker, as the orders the floor broker represents are at the head of the line, so to speak.”
In partnership with Portware, customers have the ability to directly route orders to Cuttone, the largest NYSE floor broker, which then represents them at parity.
This ensures that user orders do not get stuck in the limit order book, giving improved execution performance for limit orders, as well as increased operational efficiencies through fully electronic order transmission, according to Portware.
The partnership also allows Cuttone to provide Portware clients with greater flexibility and execution opportunities, including the closing transaction via NYSE Discretionary Quote (dQuote).
As trading floor participants, brokers have the ability to represent customer interest in the closing auction both physically at the point of sale as well as electronically using a suite of tools available in the e-Broker handheld device.
Designed to replicate their physical representation, brokers can oftentimes provide customers with greater control over their execution needs during this important time of the trading day.
“These [parity allocation and dQuote] have always been in the market, but it’s only been in the last 18 months or so that the floor broker was able to scale the business and get orders into the market,” Bliss said. “Completing the electronic chain through Portware allows for extension of these unique order types all the way to the end client.”
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