Commentary

John Turney
Traders Magazine Online News

Foreign Exchange Infrastructure: Yesterday, Today and Tomorrow

In this exclusive to Traders Magazine, John Turney, Global Head of Outsourced FX at Northern Trust, discusses the evolution of the fx infrastructure and what is to come.

Traders Poll

What is your favorite movie about trading?

Wall Street

23%

The Big Short

13%

Margin Call

6%

Equity

0%

Trading Places

38%

The Wolf of Wall Street

8%

Boiler Room

7%

Arbitrage

0%

Too Big to Fail

5%

Free Site Registration

November 1, 2001

Reserve Size Requirement Reduced

By Gregory Bresiger

Beginning this month, Nasdaq has ended the requirement that market makers display at least 1,000 shares for their quotes using the market's reserve size feature. Under a rule change, market participants will now only be required to display 100 shares when using the feature.

The change was designed, in part, to make the competition between market makers and ECNs fairer. ECNs are only required to display 100 shares. Many traders have been pushing for the change.

One trader describes the 1,000 share size requirement as "ridiculous" especially since ECNs are only required to display 100 shares. But the flip side of the change, according to critics, is the reduction of transparency.

With 1,000 shares traders could tell if a participant was a serious player, said another trader. The problem is a rule change designed to help one constituency - individual investors - often comes at the expense of another, market makers. The issue is transparency versus the need of market makers not to tip their hands when they are trying to execute a trade.

The reserve requirement is used so market makers can line up a large block of shares for trading without letting competitors or day traders know what they're about to do.