The long journey of the New York Stock Exchange (NYSE) from demutualization to a reverse-merger IPO, and on to the merger with Euronext, and to the alliance with Tokyo Stock Exchange (TSE), will make for a fascinating subject of many a business history book. Deutsche Börse and London Stock Exchange (LSE) will make for interesting collateral damage and props, respectively. It should be noted that NYSE has had a regulatory role in addition to its being a market for securities.
Equally interesting is the trajectory of the big i-banks relative to NYSE. Exemplar is Goldman Sachs (GS), which has placed its people and made money on ALL sides of the NYSE-related transactions, ALL the time from demutualization until last Friday when one of its analysts, by downgrading NYSE, sent its stock price (NYX) down. To return to the i-banks, they are forming what seems to be an exchange, separate from NYSE, to make sure they get the best service at the lowest cost. Thus, a question arises: Do we face a failure of the market, or a regulatory one?
Indeed, while the banks had been the NYSE patrons, the Exchange could do no wrong. Then the banks got out of NYSE, making lots of money, so that NYSE could do its job better--faster and cheaper trades. However, since the banks want to set up a separate exchange, inscrutable to you and I, is it that they don't trust either the open markets or the regulation that comes with open markets?
Equally interesting is the trajectory of the big i-banks relative to NYSE. Exemplar is Goldman Sachs (GS), which has placed its people and made money on ALL sides of the NYSE-related transactions, ALL the time from demutualization until last Friday when one of its analysts, by downgrading NYSE, sent its stock price (NYX) down. To return to the i-banks, they are forming what seems to be an exchange, separate from NYSE, to make sure they get the best service at the lowest cost. Thus, a question arises: Do we face a failure of the market, or a regulatory one?
Indeed, while the banks had been the NYSE patrons, the Exchange could do no wrong. Then the banks got out of NYSE, making lots of money, so that NYSE could do its job better--faster and cheaper trades. However, since the banks want to set up a separate exchange, inscrutable to you and I, is it that they don't trust either the open markets or the regulation that comes with open markets?
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Banks back move for block trading
By Anuj Gangahar in New York
Published: March 1 2007 02:00 | Last updated: March 1 2007 02:00
Several of the world's largest investment banks have decided to join a new trading system called Bids - the Block Interest Discovery System - in an attempt to allow cheap and anonymous exchanges of large blocks of shares.
Bids is one of the latest examples of so-called dark books, or dark pools of liquidity. These systems serve as alternatives to traditional exchanges by providing private access to the order flow of an individual bank, or, in the case of Bids, a group of banks.
Bids was founded by Citigroup, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS in an attempt to increase competition and liquidity in equities trading.
Now Bank of America, Bear Stearns, Credit Suisse, Deutsche Bank, JPMorgan and Knight Capital Group have lent their support by investing in the alternative trading system.
Timothy Mahoney, chief executive officer of Bids, said the internal dark liquidity pools of individual banks were likely to be used for smaller, more specialist order flow whereas Bids was designed specifically for large blocks of shares.
He said that while markets such as the New York Stock Exchange had improved their efficiency and technology considerably in recent years, block trades remained a difficult proposition from an infrastructure and technology point of view.
Earlier this week, the NYSE introduced curbs on trading designed to ensure that the trading of large blocks of shares by specialist traders did not exacerbate market falls.
Bids will offer users an efficient electronic trading platform to anonymously execute block trades and is expected to launch in spring.
"This level of industry support prior to our launch validates our model and helps build tremendous momentum in advance of the launch of the system," Mr Mahoney said. "We are confident our model will empower traders by giving them the tools they need to successfully execute block trades."
The system will be accessible to both buy-side and sell-side users that want to trade large blocks through continuous order matching and trade negotiation.
The company said the use of Bids as a block trading service would not be exclusive or subject to volume commitment and each participant could continue to use any other automated trading system, electronic communications network or exchange service that supported the trading needs of its customer base.
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