Every now and then, an editor receives positive feedback from a reader that makes his day. Last month I received an unsolicited phone call from the head of a major trading desk. He called to congratulate our staff on our story on commission sharing arrangements (CSAs). The cover story ran in December. It so happened that CSAs made up a large portion of one of his firm’s morning meetings, and senior executives quoted several passages from our article, he said. He then asked if he could get an electronic copy, so he could distribute it internally and to select institutional clients. It was already on our Web site, so I was happy to oblige and sent him the link. I passed on the good word to the story’s authors: staffers Gregory Bresiger and Peter Chapman, as well as freelancer Hillary Jackson.
Chapman reminded me that Bob Greifeld, president and CEO of Nasdaq, did something similar last spring while addressing attendees at a meeting on market structure. Greifeld held up a copy of Traders Magazine and referenced a story that said the New York Stock Exchange’s hybrid market proposal was beginning to look like an ECN.
Now that the hybrid is largely in place, the industry will begin to see if the NYSE does indeed become more like an ECN. The first indications show that it just might. A story in this month’s Industry Watch section notes one big change under hybrid: The NYSE’s percentage of price improvement has dropped precipitously. Price improvement could still increase, the story reports, but that depends on how aggressively the specialists push their algorithms. Price improvement always has been a cornerstone at the Big Board.
Market structure has been a major topic in the equities business in recent years. Its evolution has helped some firms to become billion-dollar-plus companies in just a few years-a firm like Liquidnet is an example. And its evolution has also crimped the business models of a number of others-the $2 business at the Big Board isn’t a growth business.
Our job as a publication is to shed light on these mind-boggling changes and help our readers understand what they mean. We’re not the experts. We’re not paid consultants pumping out report after report that would make a technocrat blush. But we must be adept at reading the tea leaves of the industry, making sense of the seismic shifts that are taking place and explaining the complex in simple terms. That’s what brings us into the office each day. The occasional pat on the back doesn’t hurt, either.