NYSE Euronext on Wednesday changed the transaction pricing on NYSE Alternext, formerly known as the American Stock Exchange, as part of its broader plans for what it calls its new “growth market.” The new maker-taker pricing will go to effect on Dec. 1.
Starting in December, Alternext will rebate its participants 15 cents per 100 shares for liquidity-providing orders. It will charge them 25 cents for orders that remove liquidity. Hidden orders are subject to the same pricing. For the rest of this month, Alternext will maintain its current volume-based fees of either 25 or 30 cents per 100 shares for all liquidity-providing and liquidity-taking orders.
NYSE Euronext changed Alternext’s pricing for two reasons. “The general strategy has been to simplify the pricing for exchange members, and to move to a maker-taker model instead of the current Amex schedule,” said Joe Mecane, executive vice president and chief administrative officer for U.S. markets at the exchange company.
“The pricing structure [at Amex] isn’t as straightforward as exchange pricing has become,” Mecane said. Currently, member firms get one bill every month from the specialist, and another one from the exchange. Starting in December, they’ll get just one bill from the exchange.
Mecane said NYSE Euronext discussed the pricing changes with Alternext members before making them. The new pricing is expected to yield large cost reductions for most firms. “The rate we’ll be charging is dramatically less than the combination of specialist and exchange bills,” Mecane noted. “It’s a significant reduction for most firms.” The cost savings will come from the new rebate for liquidity adders and the streamlining of the current complex pricing schedule. Mecane added that most floor members think maker-taker is the right path forward for Alternext.
Alternext’s current market share in operating companies listed in that market is about 15 percent. Mecane said he hopes to increase that market share to 30 percent by the end of 2009. The exchange-traded funds listed on Amex are in the process of being moved to the NYSE Arca electronic platform, which uses much faster technology. Alternext will use NYSE technology, which is slower than Arca’s, starting in December. All NYSE Euronext markets are expected to shift to a single sub-millisecond trading platform by the end of 2009, Mecane said.
Jamie Selway, founder of agency broker White Cap Trading, congratulated NYSE Euronext for updating Amex’s pricing, but noted that “people aren’t using Amex much for single-stock names, and there’s nothing here that gets people to change their behavior.” He added that “it will take pricing plus improved technology to bring people back to Amex.” Selway expects more pricing changes as the exchange operator improves the technology that supports the NYSE and Alternext markets.
“We’re experimenting with different rates and are open to evolving them as we get experience with them over the next couple of months and people give us feedback,” Mecane said. He added that the Alternext model, in contrast to ECN-like markets, is a hybrid of maker-taker pricing and a system that gives members parity and has dedicated liquidity providers.
Amex specialists will be known as designated market makers starting in December. They will get a 35-cent rebate for adding liquidity in illiquid names as well as the revenue associated with the quote credit that NYSE Euronext receives for those names. NYSE Euronext hasn’t yet decided whether the NYSE’s program of supplemental liquidity providers will be extended to the Alternext market, Mecane said.
Amex equity traders will move to the NYSE trading floor on Dec. 1. They’ll be located at Post 1 and Post 2 in the Garage. Mecane said most specialists and floor traders trading Alternext operating companies are expected to make the move. Options traders will transition into their new digs in the first quarter of next year. New options pits are currently being built in the Big Board’s Blue Room and Extended Blue Room.
