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December 1, 2000

Big Board OpenBook Quote Depth Concern

By Peter Chapman

Technology executives at the New York Stock Exchange are scratching their heads over how to build a major piece of the Big Board's much-anticipated OpenBook.

The data feed, slated to debut in May, gives traders off the floor a look at specialists' limit order books. The launch will follow the NYSE's conversion to decimal-pricing which has seen tick sizes drop on some stocks from six cents to a penny.

NYSE chief technology officer Roger Burkhardt says the problem is in deciding how many levels of quote information to broadcast and how to package them. Currently, specialists see the best bid and offer plus four ticks away on either side. That's a range of about 50 cents. In a penny-tick world, it would likely drop to only eight cents.

"Do I want to show a hundred price points or does that start to get indigestible?" Burkhardt asked. "Also, as a buy-side trader, am I really interested in seeing 100 shares at three cents above the current offer? I don't think so."

Burkhardt is considering presenting the data in summary form. That's how Nasdaq plans to display quotes in its proposed SuperMontage central limit order book.

Some traders question whether there will be much more than 100 shares to display. Bernie McSherry, an NYSE floor broker with SunGard's Axis, told attendees at the Security Traders Association annual conference in Boca Raton that institutional traders may be reluctant to use the book. They worry about the effect on prices of too much openness.