NYSE CEO's John Thain's departure to run Merrill Lynch and the elevation of co-COO Duncan Niederauer to CEO was not the only excitement at the NYSE. After the bell yesterday, specialist firm Van der Moolen announced that they were seeking to exit the specialist business altogether.
The problem? Despite a significant investment, the specialist part of the operations continue to lose money. The company said they were seeking an "orderly transition" out of the business.
This has important implications for the NYSE. Specialists are charged with making orderly markets in the stocks they cover; Van der Moolen has one of the biggest books of stocks at the NYSE. The NYSE can bring in an outside organization to take over the book, or bring in an existing specialist firm to take over the whole book, or split it up. It’s likely this will be decided within the next month, perhaps sooner.
--This is good news for the NYSE. The NYSE should use the opportunity to bring in new, more aggressive market makers who have extensive experience in algorithmic trading. The floor has been becoming less important in terms of price discovery and participation; this is an opportunity to shake things up.
--NYSE should redouble its efforts to get changes through the SEC that would make it easier for specialists and traders to participate in trading activities.
--Expect at least one other specialist firm to throw in the keys in the near future.
The NYSE released the following statement to me:
"The New York Stock Exchange, at the request of and in cooperation with Van der Moolen Specialists, will ensure an orderly reassignment of the specialist firm's NYSE-listed stocks . This effort will be part of a more extensive transition process where we expect to add new liquidity providers to our Specialist community, further enhancing market quality on the NYSE."
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