To improve the market quality of NYSE American, our listing home for emerging companies, we are making two important upgrades. These will benefit both the companies listed on NYSE American and clients trading on the exchange.
- First, we plan to file a rule change with the SEC to remove the speed bump from NYSE American. Implemented in 2017, it applies a 350-microsecond delay for orders and proprietary data.
- Next, we plan to restore Floor-based Designated Market Makers to NYSE American, bringing our premier high-touch model back to NYSE American-listed securities.
These upgrades reflect our commitment to provide the best market quality for securities listed on NYSE Group exchanges.
Several years ago, the symmetrical speed-bump concept emerged with much fanfare and we decided to offer it to our NYSE American community. We look to provide investors with choices to meet their trading objectives, which is one reason we operate multiple unique equities exchanges. The speed bump was designed to advantage resting, non-displayed orders and we hoped it might encourage more institutional midpoint trading on the exchange.
However, the promise of the speed bump has proven greater than its reality. The data is clear: NYSE American securities trade better with a human DMM and without an intentional delay mechanism.
Since our speed-bump rollout, we have seen market quality and liquidity decline on NYSE American.
Performance in NYSE American-listed securities
|NYSE American||Before Speed Bump|
(Jan 1 2017 – Jun 30, 2017)
|After Speed Bump|
(Aug 1 2017 – Oct 18, 2019)
|Average quoted spread||208.2||292.4|
|Average quoted shares at the BBO||2,762||1,197|
|Average quoted notional at the BBO*||$13,342||$9,549|
|Percentage of trading day quoting at the NBBO||71.3%||68.4%|
|Consolidated average daily volume||123.9 million||113.8 million|
|Opening/Closing Auction Share of Volume||5.1%||4.0%|
|Closing Auction Slippage (bps)||108.8||127.6|
*Duration-weighted average of times the exchange is publishing a quote
Subject to effectiveness of the proposed rule change, the speed bump’s removal will take place on November 18. Initially, we will continue to operate NYSE American as an electronic market with a standard price-time priority order book.
Next, we will proceed with our plan to restore Floor-based DMMs to NYSE American for its listed companies. These DMMs will oversee the trading of each NYSE American-listed security, bringing valuable human judgment to the market and an auction mechanism that outperforms purely electronic alternatives. This will combine with our cutting-edge Pillar technology platform to provide clients and listed companies with the best possible trading experience. Other securities, including NYSE and NYSE Arca-listed products, will continue to trade in an electronic-only, price time order book on NYSE American.
On our flagship New York Stock Exchange, the value of DMMs is demonstrated time and time again, particularly in times of market volatility. Importantly, auction quality is enhanced with the participation of DMMs on the floor.
We are excited about these steps to improve NYSE American market quality and continue seeking opportunities to strengthen our product offering.