Commentary

Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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May 10, 2006

At Deadline

By Editorial Staff

Trade Through on Hold

*Reg NMS's trade-through rule will be delayed beyond its planned June 29th implementation date, SEC officials have now publicly conceded. Both SEC commissioner Annette Nazareth, responding to reporters' questions, and a key staffer separately made that admission late last month (March). Bob Colby, acting head of the SEC's Division of Market Regulation, told congressional staffers that questions still existed about how the trade-through rule would be applied to electronic markets that never had one.

Several trading executives, who have favored a delay in order to adjust their trading platforms, were delighted. One executive told Traders Magazine, "I hope trade through is never put into effect." -Gregory Bresiger

Hybrid Gets Go Ahead *New York Stock Exchange specialists got their wish but at a price. Specialists are now granted the power to create proprietary algorithms under the NYSE's hybrid market plan that was approved by the Securities and Exchange Commission. But specialists will be required to "maintain an electronic log of all algorithmically generated messages," including the date and time of each message, according to the SEC order approving the plan. Besides maintaining algo message records, each specialist firm will now be required to have these messages audited annually by an independent third-party firm. The debate over how these prop algos will operate has been protracted. Critics of the much debated plan charged that specialists would be given unusual privileges, that would allow them to unjustly maintain their dominance on the exchange. -Gregory Bresiger

IOI's: London Calling nA new indications of interest network has launched in the U.S., claiming some investment banks and money managers as members. UBS and "several" others have signed onto Ioinet, a network run by the U.K.-based Fix City. Established in Britain in 2002, the services delivers IOIs-basically, invitations to trade-from the sellside to the buyside. In the U.K., Fix City boasts most of the major investment banks and 40 money managers as Ioinet users. The service is an alternative to direct feeds from brokers as well as the Thomson AutEx IOI network. The fledgling U.S. service has only two buyside shops. But Fix City's New York office has technical support. Ioinet's delivery of IOIs is "smarter" than established means, says Paul Scott, a Fix City director. -Peter Chapman

Credit Suisse and SEC *Credit Suisse Securities asked the Securities and Exchange Commission to revise rules that prohibit money managers from using commissions to pay for certain trades executed on brokers' systems.The big broker, which recently launched an alternative trading system called CrossFinder, wants the SEC to expand the Section 28(e) safe harbor of the Exchange Act of 1934. Currently, the rule allows the use of commissions to pay for executions only on an agency basis. It bars their use for principal trades. Credit Suisse wants Section 28(e) expanded to include customer orders matched against proprietary orders on a broker-dealer's automated internal matching engine. That way trades between its proprietary and dealer desks and its customers will be eligible for a safe harbor. Credit Suisse, in a letter to the SEC, noted principal trades matched on CrossFinder would fall under 28(e) if matched on an external ATS. - Nina Mehta