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September 12, 2006

Big Board Forms Hybrid Review Committee

By Gregory Bresiger

Have any complaints about the New York Stock Exchange's new hybrid market model?

The Big Board now has a Hybrid Review Committee for those who do. The plan was the focus of much criticism and even a lawsuit when it was under review by regulators.

Many buysiders opposed the hybrid market model, with some only persuaded to accept it by the assurance that a permanent committee would be set up by the NYSE to monitor it.

Some buysiders, who will be represented on the new committee, complained that the plan was biased in favor of specialists. They were given various privileges that allowed them to take orders away from institutional investors, plan critics said.

Even some floor brokers tried unsuccessfully to derail the plan through a lawsuit. They complained that the specialists received an algorithm before the NYSE gave them their discretionary order. This is a tool some floor brokers deemed vital for their survival.

NYSE officials, sensitive to comments that the plan was unfair, emphasize that they have set up what they describe as a "balanced" 10-member Hybrid Review Committee.

The committee is comprised of three buysiders, three sellsiders, two specialists and two floor brokers, according to NYSE officials. They said a chairman had not been selected as yet. But they said Kevin Cronin of AIM Investments and James Manfredonia of Bear Stearns are serving on the Committee.

Cronin also serves as chairman of the NYSE's Institutional Traders Committee (ITAC), which is comprised of buyside traders who advise the exchange. Manfredonia heads the Upstairs Traders Advisory Committee (UTAC), which is comprised of upstairs traders at brokerage firms.

An NYSE spokesman said the new committee "will fine tune" the hybrid market model "where appropriate."