To improve the market quality of NYSE American, our listing home for emerging companies, we are making two important upgrades. These will benefit both the companies listed on NYSE American and clients trading on the exchange.
These upgrades reflect our commitment to provide the best market quality for securities listed on NYSE Group exchanges.
Several years ago, the symmetrical speed-bump concept emerged with much fanfare and we decided to offer it to our NYSE American community. We look to provide investors with choices to meet their trading objectives, which is one reason we operate multiple unique equities exchanges. The speed bump was designed to advantage resting, non-displayed orders and we hoped it might encourage more institutional midpoint trading on the exchange.
However, the promise of the speed bump has proven greater than its reality. The data is clear: NYSE American securities trade better with a human DMM and without an intentional delay mechanism.
Since our speed-bump rollout, we have seen market quality and liquidity decline on NYSE American.
|NYSE American||Before Speed Bump
(Jan 1 2017 - Jun 30, 2017)
|After Speed Bump
(Aug 1 2017 - Oct 18, 2019)
|Average quoted spread||208.2||292.4|
|Average quoted shares at the BBO||2,762||1,197|
|Average quoted notional at the BBO*||$13,342||$9,549|
|Percentage of trading day quoting at the NBBO||71.3%||68.4%|
|Consolidated average daily volume||123.9 million||113.8 million|
|Opening/Closing Auction Share of Volume||5.1%||4.0%|
|Closing Auction Slippage (bps)||108.8||127.6|
*Duration-weighted average of times the exchange is publishing a quote
Subject to effectiveness of the proposed rule change, the speed bump’s removal will take place on November 18. Initially, we will continue to operate NYSE American as an electronic market with a standard price-time priority order book.
Next, we will proceed with our plan to restore Floor-based DMMs to NYSE American for its listed companies. These DMMs will oversee the trading of each NYSE American-listed security, bringing valuable human judgment to the market and an auction mechanism that outperforms purely electronic alternatives. This will combine with our cutting-edge Pillar technology platform to provide clients and listed companies with the best possible trading experience. Other securities, including NYSE and NYSE Arca-listed products, will continue to trade in an electronic-only, price time order book on NYSE American.
On our flagship New York Stock Exchange, the value of DMMs is demonstrated time and time again, particularly in times of market volatility. Importantly, auction quality is enhanced with the participation of DMMs on the floor.
We are excited about these steps to improve NYSE American market quality and continue seeking opportunities to strengthen our product offering.
Multi-list options broke nearly all volume records in 2021, driven by the growth of retail participation: daily records (24 of the top 25 volume days of all-time came in 2021), monthly ADV records (April was the only month from 2021 not in the top 12 all-time), and yearly ADV records (37.3M ADV in 2021 was nearly 10M more than in 2020 and double the ADV in 2019).
Increased retail activity in the equities market has affected which stocks are trading the most, and when and where those stocks trade. We’ve previously highlighted retail’s impact on pre- and post-market volume and the opening auction, and now focus on the period immediately after the opening auction. Market participants often avoid this time of day due to higher volatility, an approach worth re-evaluating given current trends.
As the home of ETFs, the NYSE continuously works to strengthen market quality and provide the optimal trading environment for listing and trading ETFs. In April 2021, in service of this goal, the NYSE introduced new requirements and incentives for its industry-leading NYSE ETF Liquidity Program, including the assignment of additional market makers ("Less Active ETF Leads") for new and/or low-volume ETFs.