(Bloomberg) — The New York Stock Exchange and its siblings are poised to get a new engine.
The upgraded technology, dubbed Pillar, will run trading on all U.S. stock and options markets owned by Intercontinental Exchange Inc.s NYSE Group. The NYSE Arca stock exchange will get it first, starting during the third quarter, followed by other markets including the New York Stock Exchange.
Software provides the heart of any modern exchange. After buying NYSE in 2013, ICE determined that the exchanges systems were outdated and slow, prompting the acquisition of upstart trading-software developer called Algo Technologies Ltd., people familiar with the matter told Bloomberg News in April. The technology at NYSEs main rivals in the stock market, Nasdaq OMX Group Inc. and Bats Global Markets Inc., is generally highly regarded.
Algo Technologys website touted its matching engine — the core exchange software that runs trading — as the industrys fastest. Pillar includes a new matching engine as well as new methods customers can use to connect to the exchange. NYSE started introducing its current system, called the Universal Trading Platform, more than five years ago.
It is probably long overdue for NYSE to upgrade both Arca and NYSE proper, Sang Lee, managing partner at research firm Aite Group LLC, said by e-mail. And it also makes a lot of sense to have a single platform to run the entire cash equities franchise, streamlining any vendor relationships and being able to reduce maintenance and upgrade costs associated with multiple technology platforms.
Pillars Goals
Pillar is an integrated trading technology platform that will enable you to connect to all of our equities and options markets using a single specification, NYSE told customers Thursday in an e-mail. Pillar has been designed to reduce complexity, while enhancing consistency, performance and resiliency.
The announcement of Pillar is the latest change at the Big Board since ICE bought it in November 2013. Since the deal closed, Atlanta-based ICE has spun off units and changed management, including Chief Executive Officer Jeff Sprecher making one of his top deputies, Tom Farley, the head of NYSE Group. ICE also sold off some businesses including an NYSE technology division and spun off the European equities unit, Euronext NV.
Simplifying Markets
Sprecher has called for simplifying trading in the entire U.S. stock market, which is distributed across 11 exchanges — including the 10 run by NYSE Group, Nasdaq and Bats — and dozens of private platforms.
Last year, he called for an industry moratorium on new order types — the instructions traders use for how their orders should be handled. ICE was later criticized by some for introducing an order type at the New York Stock Exchange associated with high-frequency traders. To detractors, orders types are too numerous and complicated, making markets opaque and giving advantages to the fastest traders.
In todays announcement of Pillar, NYSE said the system will provide harmonized order types across all of the companys markets.
Sprecher has dived into efforts to change the rules and operations of the broader U.S. stock market. A draft proposal circulated by NYSE among investors and brokers seeks a grand bargain across the industry, a person who saw the plan said in December. The exchange was proposing curbs to trades on private venues such as dark pools and agreements to cut trading fees by public markets.
We believe that the NYSE will be a more attractive business with our planned technology enhancements, right-sizing the expense base and by taking a leadership role in market structure change, Sprecher said on a November conference call.
Other U.S. exchanges recently moved to a different platform. Bats Global Markets Inc. acquired Direct Edge Holdings LLC a year ago. Earlier this month, the two Direct Edge stock markets were shifted over to Bats technology.
