NYSE like a drugged bull in bullfight over share orders, exchange president says By Reuters
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John McCrank
NEW YORK, (Reuters) – The New York Stock Exchange’s head called on regulators Thursday to modify rules making it more difficult for the NYSE and other trading platforms to trade stock orders. The market share for exchanges during retail trading has declined compared to those of off-exchange brokers.
Stacey Cunningham is president of Intercontinental Exchange.
At an annual meeting of Securities Traders Association, she stated that “it’s as if we’re in a Bullfight” and added, “You can beat the exchange prices if the bull has been drugged and starved for at least two weeks.”
U.S. Securities and Exchange Commission Chair Gary Gensler has said his agency is revisiting regulations he says may create an unequal playing field https://www.sec.gov/news/speech/gensler-global-exchange-fintech-2021-06-09 for exchanges versus broker dealer-run trading platforms.
Sub-penny Rule is one rule that the SEC will be reviewing. The rule prevents exchanges displaying bid/offer quotes in increments lower than a penny. However, off-exchange trading platform can offer fractional and sub-penny prices discounts to exchange prices. This is appealing to retail brokers, who must get the best price for their clients.
In 2005, the rule was adopted because it was believed that sophisticated traders could use smaller price increases to outperform retail orders.
Wholesale brokers will account for the majority of all retail orders by 2021.
According to Virtu Financial (NASDAQ), retail trading has risen in the last few years as an online broker dropped their trading commissions and because of this, it accounts for just slightly over 20% of total market volume. In 2018, however, that figure was barely 10%.
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