NYSE Looks to Fill Information Void Left by Specialists

The New York Stock Exchange, hoping to fill a need its specialists no longer can, is launching a new trading information service for its issuers.

The new Internet-based platform will build on the exchange’s NYSEnet market information service to give senior executives of its listed companies a comprehensive view of trading in their stocks throughout the day.

Investor relations executives, CFOs, CEOs and others will be able access a database or communicate with customer service representatives to get a sense of why their stock is up or down. The exchange expects to launch the new service sometime in the next couple of months.

The exchange would offer few details except to say the new platform is an improvement on NYSEnet that will offer “all kinds of trading data in real-time.”

The heart of NYSEnet is the exchange’s NYSE Marketview database which makes available OpenBook, the NYSE’s limit order book, and VolumeTrac, data that includes the names of brokerages and the size of their trades.

“Marketview is a huge database,” a NYSE spokesperson said. “And it will be expanded even more.” The official adds that the upgrade will include more real-time data and be put together in a way that is not possible by such market data vendors as Bloomberg or Thomson Reuters.

The new service will also boast a customer service operation “similar to Nasdaq’s Market Intelligence Desk,” the official said. Nasdaq runs its MID from its Times Square site, staffing it with former traders who are able to provide executives of its listed companies with some color surrounding the trading of their stocks.

The New York has been working on NYSEnet for at least the past two years. Its last upgrade was announced in May 2007 when it added NYSE MarketView.

Behind the exchange’s effort to provide its issuers with better information about their stocks is a decline in the effectiveness of the specialist.

Before Hybrid, the specialist kept executives of companies whose stocks he handled up to date on the trading activity in those stocks. Since Hybrid, however, electronic trading has surged and the New York’s market share has plummeted. The specialist plays a smaller role and has less information to impart. So, the New York hopes to fill that information void.

“The specialist doesn’t have the same level of information he once had,” explains a former specialist. “Things are happening that he doesn’t see in the crowd.”

Nasdaq has already stepped into that void. Last November, it began offering the services of its Nasdaq Online database of trading information and its MID program to NYSE-listed companies. Access to MID also permits issuers to consult with market makers associated with its Select Market Maker program.

About 50 NYSE-listed companies are using the free service, according to Bruce Aust, Nasdaq executive vice president in charge of the corporate client group.

Aust notes that NYSE-listed company executives want to know how much volume Nasdaq is doing in their stocks. “With the specialist participating in only 2 percent or 3 percent of the trades, [these executives] are telling us that they are not getting the information they need,” Aust says.

Nasdaq is already inching past the NYSE in the trading of its listed shares. On Friday, July 11, Nasdaq traded 1.73 billion NYSE shares while the Big Board traded 1.727 billion.

“We are doing more trading in their stocks than they are,” Aust added, “so we feel like we have better information.”

Since December, three companies – DirecTV, CA Inc., formerly known as Computer Associates, and CME Group, the company formed by the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade – have moved their listings from the NYSE to Nasdaq. Aust attributes the decisions partly to the quality of trading information Nasdaq offers.

Jeff Morgan, president and chief executive of the National Investor Relations Institute, notes it is absolutely critical for company executives to understand the trading in their companies’ stocks.

He would not speak to the relative merits of the Nasdaq program, but notes the demise of the specialist system has opened the door to various vendors to replicate the information specialists once provided.

“Certainly in the old market structure the specialists provided a window for investor relations officers into what was going on,” Morgan said. “But without specialists, there is an evolution. There are many vendors coming out with products that are trying to replace that.”