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Hurting The Little Guy

Traders Magazine, October 2001

Harold Bradley

A distinguished market structure scholar has described the New York Stock Exchange as a sort of "historical accident." If the Big Board was redesigned today, he suggests, it would not start with a floor, it would start with an electronic platform. Richard Grasso, the Big Board chairman disagrees, saying that blending human traders and technology "in terms of providing services to customers" is the best solution. The Securities and Exchange Commission has attempted to resolve this apparent conflict through the adoption last year of Rule 11Ac1-5. This requires market centers to report each month a standard set of statistics that measure execution quality for small-order customers. The Big Board did not fare well in the first month's reported data. In key measures of effective spread and speed of execution, it indicated relatively poor performance for the Big Board. The exchange, deflecting possible criticism, explained that results may have been compromised by the exclusion of institutional blocks' exceeding 10,000 shares.

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