NYSE and AMEX Receive Extension to Sub-Penny Pricing Rule

Due to legacy systems at both the New York Stock Exchange and the American Stock Exchange, the Securities and Exchange Commission has given both exchanges more time to comply with the sub-penny pricing rule under Regulation NMS, according to a brokerage industry source and a Nasdaq announcement.

According to the brokerage source, the SEC has decided that the sub-penny pricing rule will go into effect as planned next Tuesday, Jan. 31, but that any NYSE-listed or Amex-listed securities would not have to comply until their legacy systems are taken off-line and the new NYSE Hybrid and AEMI systems are operating. This is necessary because the legacy systems are not capable of handling quoting and intermarket reports and providing orders in sub pennies, says the source. Because of technical issues, the industry source says, "The legacy systems in place at the NYSE and AMEX could not take traffic in more than two decimal points through the Intermarket Trading System, so those legacy systems need to be off line."

Tentatively, the new date for NYSE and AMEX compliance is June 29, which is the same day that Reg NMS implementation is scheduled to begin in 100 stocks.

Meanwhile, the rest of the industry is moving forward with the sub-penny pricing rule on Jan. 31.

According to a Nasdaq Trader Alert, sent out Thursday, Jan. 26, Nasdaq will implement Reg NMS sub-penny changes to the Nasdaq Market Center, Brut and INET on January 31, 2006. [read it here]

"However, due to readiness issue at the New York Stock Exchange and the American Stock Exchange, the Nasdaq Market Center will continue to quote in penny increments in NYSE and Amex-listed stocks trading below $1. The Nasdaq Market Center will round any sub-penny orders/quotes received in these stocks."

In other trading news, the week closed on an active note!

Pipeline Trading Systems LLC, an electronic marketplace for trading large blocks of stock, that lets buy and sell-side firms execute anonymously, scored another milestone in trading volume. On Wed., Jan. 24, Pipeline executed over 24 million shares, with an average trade size over 45,000 shares. [Read it here]

According to Pipeline's release, ninety-six percent of the shares traded within the best displayed prices nationwide. The previous record was 21.6 million shares, executed on Sept. 30, 2005.

BATS Trading Inc., located in Kansas City, went live today with its new ECN, reports CEO Dave Cummings in an email announcing the launch. "Trading volume was very light on the first day, but some subscribers have indicated they expect to ramp up their volumes next week," writes Cummings.

Cummings thanked the firm's associates and technical staff for their hard work keeping the project on schedule. BATS is currently working with a number of subscribers who are in the processing of connecting to the system, the CEO writes.

According to BATS' Web site, the ECN is seeking: U.S. broker-dealers that trade at least five million shares daily, that are connected to multiple ECNS and use algorithms to handle high trading volumes with low overhead. To get in touch with BATS, call 816-285-9900. [Go to: www.batstrading.com] Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio