The New York Stock Exchange's small-order automatic execution service is an endangered species.
The future of the NYSE's Direct+ – which promises automatic executions at the best bid or offer on orders of up to 1,099 shares – is under debate, according to Catherine Kinney, co-president and co-coo of the exchange.
Kinney, speaking at this year's Security Traders Association's annual conference, said Direct+ "should continue to have a role at the exchange, but that is not without issue." Noting that speed is important to traders who "just want to get in and get out," Kinney said Direct+ "serves a need, but there is a great raging debate on the floor."
Specialists are arguing for its discontinuation while Big Board management favors keeping it, according to sources. "The specialists hate it," said one pro, "because they can't control it."
The lickety-split service, an anomaly within the deliberately paced auction environment of the New York, has been a big hit with quantitative and other fast-gun pros. Their usage has made Direct+ the New York's most successful electronic product, now accounting for more than five percent of share volume.
Direct+ was launched in 2001. The signs of its demise first surfaced earlier this year when the Big Board received SEC approval to disable the service temporarily in five of the most liquid stocks. The plan was to allow for testing of certain features of LiquidityQuote, another NYSE product.
The NYSE is not the only market center that provides automatic executions of listed securities. Two regional exchanges and a group of third market dealers also provide auto-ex.
