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April 1, 1999

Full NYSE Institutional Express Expected Before Year's End

By Michael L. O'Reilly

T he New York Stock Exchange expects its proposed trading system for institutional orders to be fully functional before the end of the year, a source close to the Big Board disclosed.

The new system, Institutional Express, is designed to allow institutions to send orders to the NYSE floor with more anonymity and protection.

Although system details are still sketchy, the NYSE expects the system to receive regulatory approval before year's end.

"It's a step in the right direction," said Robert DiBraccio, head equity trader at Delaware Management Company. DiBraccio has heard system details from NYSE officials. "It shows a willingness by the exchange to change to service its institutional customers."

As currently envisioned, Institutional Express will have three major functions: as a router of information, as a router of orders, and as a provider of express executions.

The system would route order information allowing a look at specialists' books to institutions through a NYSE member firm.

Through a parallel feed with a member firm, Institutional Express would also allow institutions to directly send orders to the NYSE within a preset trading limit, without crossing the member firm's trading desk. The member firm would only become aware of the order after execution.

And to help reduce frontrunning on the floor of the exchange which can happen with DOT orders -- Institutional Express would offer an express-order feature.

The system would place a time limit on all orders over 15,000 shares. If a 15,000-share order were not filled within 30 seconds, it would become express eligible.

The express order would become available to all member firms and vendors, who would then repackage the order information

to institutional customers. Institutions could then enter express orders of 15,000 shares or more to interact with the original express order on a time-priority basis.

If the second express order arrives at the specialist and the original order is still available then the original order would be filled up to its price with the chance for price improvement. Any unexecuted portion would be returned to the system for further execution.

"It would be a much better way of getting trades done quickly and anonymously," DiBraccio added. "It's designed to give institutions a higher degree of comfort."

The NYSE source said many details of the proposal were still unsettled, and could change before implementation. Any system would need to be approved by the Securities and Exchange Commission

The NYSE did not return calls at press time.