Trading Newsflashes: NYSE Members File For Injunction on Merger, Tokyo Stock Exchange Explains Trading Suspension, and more

NYSE Members Request Injunction on NYSE/Archipelago Merger

New York Stock Exchange (NYSE) seat holders, opposed to the planned merger with Archipelago Holdings, filed a motion in the New York State Supreme Court on Tuesday for an injunction to delay the vote on the transaction. The motion requests that an independent board evaluate the deal and offers 30 days for the architects of the merger to remedy a list of seat holders' objections.

The motion for injunction is the latest development in a class action by seat holders who allege that the NYSE's board of directors have breached their fiduciary duties by approving unfavorable terms of the merger. The suit asserts that these terms are a result of pre-existing relationships between NYSE directors (including CEO John Thain), Archipelago and Goldman Sachs, the investment firm that advised both parties on the merger.

In a statement, the NYSE responded to the motion for injunction describing the motion as "wrong" and "an affront to shareholder democracy." NYSE claims that the action not only jeopardizes the future of the organization, but America's position of leadership in global capital markets as well. It further claims, in its own defense, to have "provided abundant information and transparency on this transaction." If the merger is successful, it will transform the NYSE into a for-profit, publicly traded company that will function as a hybrid of its traditional open outcry system and an electronic exchange.

Tokyo Stock Exchange Explains System Malfunction

Tokyo Stock Exchange (TSE) President and CEO Takuo Tsurushima issued an apology and explanation for the trading suspension that occurred last week, blaming it on faulty maintenance of the trading system by Fujitsu, the system's maintenance provider.

Tsurushima explained that during a recent update of the system in October, a latent bug was discovered in part of the trading system and corrected. When Fujitsu corrected the program, they failed to include a necessary step in the loading instructions. The incomplete instructions were then sent to Tosho Computer Systems, which is responsible for loading operations. As a result, the structure of the system included both the normal program and the older, bugged program, causing it to malfunction.

TSE was forced to suspend trading on Nov. 1 between the hours of 9 a.m. and 1:30 p.m. local time. Tsurushima apologized for the inconvenience experienced by investors and all related parties.

Transaction Cost Research: Just Another Trading Tool

As measurements become more robust, estimated costs more accurate and order management system integration more seamless, transaction cost research (TCR) will become an investment tool as common as the FIX protocol, according to a recent report from the TABB Group. The report projects that by 2007, nearly 85 percent of buy-side firms will be using TCR as essential data critical to the execution of any trade.

The report, "Trading Under a Microscope: a Buy-Side Perspective on Trading Cost Analysis," surveys 53 buy-side participants from firms with a combined $5 trillion in assets under management. The study reveals the buy-side's opinion on the value of measuring transaction costs, strengths and weaknesses of information and the impact of TCR on the asset management industry.

"Traders complained to us in interviews that the rather dizzying array of choices available to them can be an impediment to getting the trade done. Using TCR, we believe it can help traders navigate through the choices, pinpointing those strategies that have worked in the past," explains Adam Sussman, the report's author and Tabb Group senior consultant, in a release.

Two-thirds of buy-side firms surveyed for the report believe that TCR will lower their transaction costs. TABB Group's report also notes the advantage of TCR offering the buy-side objective, third-party analysis of execution quality that can be viewed by regulators.

Barclays and BT Radianz Offer DMA to Futures Market

Barclays Capital and BT Radianz have partnered to offer a direct market access (DMA) solution that provides low-latency access to major futures exchanges in the U.S. and Europe. This is the first DMA offering in the futures market and will standardize execution by utilizing the FIX protocol format, according to the companies.

"The kind of access demanded by customers has changed," said Stephane DiTullio, director of e-commerce at Barclays Capital, in a release. "While the equities market has contributed to the demand of DMA, traders are now looking for the extra edge. The progression into the futures market is a natural choice. Traders will now have the ability to leverage these complex strategies that were once limited to the equities market."

Barclays Capital is the investment banking division of Barclays Bank PLC. From its offices in 25 countries, Barclays Capital provides large corporate, government and institutional clients with financing and risk management solutions.

BT Radianz is a provider of connectivity and hosting solutions to the global financial services community. BT Radianz's shared market infrastructure offers a platform for the time-critical demands unique to financial services. The company connects over 10,000 financial sites globally.