NYSE Considering Lengthening DMM Time to Address Order Imbalances

The New York Stock Exchange is mulling the idea of extending the time designated market makers (DMMs) have to address market order imbalances in times of high market stress.

As first reported by Business Insider, citing people familiar with the matter, the change comes amid outcry as to how the exchange operator handled the extreme market turmoil seen in August. The souces said that the NYSE will extend the length of time DMMs are able to see imbalances between buy and sell orders.

NYSE was planning the tweak before August, according to two of the people, but the change has taken on added significance since markets went haywire.

Back in August, when turmoil in the Chinese equity markets reverberated here in the U.S., some traders said that NYSE had trouble providing them with timely stock price data on select stocks. The exchange denies there was trouble.

Business Insider reported that the potential change, expected to be effective in October, has particular relevance when the exchange invokes Rule 48 – which allows floor traders known as designated market makers not to provide price indications for stocks.

When Rule 48 is invoked, it can take more than 30 minutes for a stock to open for trading, and during a period of that time investors on occasion have no sense of where the share price is going.

NYSE currently publishes order imbalances to those who subscribe to its market data feed from 8:30 a.m. to 9:35 a.m. Now that time will be extended until all imbalances have been opened.

With the change,order imbalances will be published through market data feeds up until a stock opens. It means that certain customers will be able to get a sense of where prices are going even if there isn’t an official price available.

The changes will kick in with an upgrade to NYSE’s trading platform technology, called UTP 2.6.5, according to two of the people, Business Insider added.