Stock Market Maker Standards to stop Stub Rates Take Effect Today

Citing obligations to improve the market prices of securities in force today as part of an attempt by regulators to prevent a repeat of the May 6 crash.

The rules require market makers to submit bids and within 8 percent of the prevailing price for the largest U.S. stocks. That the prohibition of contributions stub or placeholder applications ranging from pennies to thousands of dollars that were adopted in response to rules that require merchants to keep the bids and offers. Quoted piece led to a "significant proportion" of the nearly 20,800 stores canceled on May 6 when $ 862 billion in shareholder value was wiped briefly in 20 minutes, regulators said.

"The rules will result in the elimination of quotes and citations piece black eye piece were 6 May," said Chris Isaacson, chief operating officer of Bats Global Markets, Kansas City, the currency trader based in Missouri accounting for 10.2 percent of U.S. volume of shares last month. "They were an anachronism. This is a good change for the market."

Stub contributions were used for the first time in the Archipelago Exchange in 2002, when the place joined the Intermarket Trading System, which operated an order routing network that connects the exchanges. SUS requires markets to provide prices on both sides, or both supply and demand, according to Jamie Selway, a managing director of Investment Technology Group Inc. in New York and ArcaEx Chief Economist at the moment. The site began operating as an electronic communications network called in 1997.

Former Regulation

"Heel appointments are an artifact of the old rules," Selway said. "They were never intended to trade." The new rules also establish a buffer of liquidity that will "eliminate the routes clearly wrong that cause stop trade," he said, referring to circuit breakers introduced in June by Standard & Poor's 500 companies and then expanded to the Russell 1000 Index and more than 300 exchange-traded funds.

SUS was dissolved in 2007 when the Securities and Exchange Commission renewed stock trading and forced the New York Stock Exchange to become faster and more automated. NYSE acquired Archipelago Holdings Inc. in 2006 in a deal that made the 214 - year-old, Grand Council of publicly traded companies. NYSE Euronext became a full merger in 2007.

As trade in the first half of the last decade away from dealer markets and to what is known as books to limit, where the liquidity comes from the intermediaries and their clients, some market makers who had requirements citing two sides began the expansion of its margins, or the difference between offers and demands presented to the trade, said Selway. Quoted piece eliminating the need to update several times from one side of the event and made the job easier, "said Selway.

Low rates

The new rules probably will not increase liquidity at the best prices on the market, said Isaacson. By requiring contributions guarantee that liquidity will prevent the problem of avoided transactions that occurred on 06 May, he said.

New York Stock Exchange was the only place I did not cancel that day operations. Designated market makers and the curbs that operated only prevent the exchange of stock prices to plunge into the New York Stock Exchange, often by a break of trading stocks for a few seconds or minutes.

For securities subject to the switches in a single action, market makers now have to place orders by 8 percent of the best selling domestic and place applications that do not exceed 8 percent of the best domestic supply between 9:45 am and 3:35 pm New York time.

Gran Banda

During the first 15 minutes and last 25 minutes of the day, market makers must quote in 20 percent of domestic supply or best offer, or NBBO. If a stock is in the trading program cuts, companies should budget by 30 per cent of the NBBO. Suspension of trading safeguards five minutes if a guarantee of 10 percent moves within a period of five minutes.

"There is a very important stretch for us to add 100 shares to each side of the market for most of the issues," said Jamil Nazarali, a managing director and head of electronic commerce in a market-making subsidiary of Knight Capital Group Inc. Where can be a problem for those companies that do a lot of activities, who call the market makers and leave with a very large budget. Will have to decide if they want to be market makers. "

Nasdaq OMX Group Inc. 's main exchange had 136 market makers in October, more than any other place, but below 143 a year ago and 429 in 2000, the company said. The number dropped by all but one year of this decade as some companies merged or dropped from an increasingly competitive business.

Nasdaq, bats

Market makers in places like the Nasdaq and clubs will be able to use exchange systems to automatically update their quotes to ensure they comply with new requirements and limit the risks that move prices. Exchanges will be updated offers and requests to be within the ranges established in the NBBO. While NYSE Arca ended its program offerings provides 1 cent and car sales double last closing price of the action, is developing a system that allows companies to automatically quote a certain percentage of distance the NBBO, according to an announcement.

Citing requirements could pose risks for some firms in less liquid stocks, said Nazarali, who lives in Jersey City, New Jersey. For these actions, the differential between domestic supply and the best offer can be more than 60 percent of the stock price, he said. To meet the new rules, market makers have to quote within that range, forcing it to buy at higher prices or sell for less than they would prefer, he said.

"It will force a lot of people who want to be market makers to post quotes that are far stricter," said Nazarali.