NYSE Euronext Recruits Electronic Mkt Makers To Amex Platform

8th Jul 2010 22:18

By Jacob Bunge Of DOW JONES NEWSWIRES NYSE Euronext (NYX) on Thursday moved to double the number of electronic specialist firms on its Amex options platform, as screen trading takes on a bigger role at the exchange. The company recruited five big Wall Street firms to serve as electronic market makers in 650 options classes, part of an ongoing effort to boost liquidity at the Amex. Since NYSE Euronext took over the exchange in 2008, the company has sought to make it more competitive by implementing new trading technology and selling a minority stake in the Amex to a group of seven banks and trading firms. Five of those seven--Goldman Sachs Group Inc. (GS), UBS AG (UBS), Citigroup Inc. (C), Barclays PLC (BCS), and Citadel--currently run units that have served as so-called e-specialists on the Amex since February. Joining their ranks on July 12 are Interactive Brokers Group (IBKR) unit Timber Hill, Integral Derivatives, Wolverine Trading, Susquehanna Securities and Morgan Stanley (MS). The e-specialist designation carries requirements laid out by the exchange for making markets and quoting prices, according to NYSE Euronext. Market makers serve as the middlemen in financial markets, standing ready to sell shares to customers that want to buy, or vice versa. The role of the floor specialist has been supplanted over the past decade by computer-driven trading firms that are able to transact thousands of orders per day, sometimes entering and exiting positions in a matter of seconds. NYSE Euronext brings the new liquidity providers on board amid a shift in the way options are traded at the Amex, with nearly two-thirds of contracts now changing hands electronically. In May 2009, volume transacted on NYSE Amex's physical trading floor was double that traded on screen, according to Chief Executive Steve Crutchfield. The moves have helped lift Amex's profile in the fiercely competitive U.S. options industry. Last month the exchange transacted about one out of every ten U.S. options trades, almost double its market share at the time of the Amex's takeover by NYSE Euronext. The announcement Thursday also signals a willingness by liquidity-providing firms to follow requirements for making markets at a time when regulators are eyeing tougher rules for trading on exchanges. The volatile price movements of the May 6 "flash crash" saw some of the biggest professional trading firms pull out of the stock market, a decision that critics said contributed to a nearly 1,000-point drop in the Dow Jones Industrial Average in a matter of minutes. The Securities and Exchange Commission as well as Nasdaq OMX Group Inc. (NDAQ) are mulling whether or not major traders in U.S. markets ought to carry requirements to continue making markets throughout turbulent periods. -By Jacob Bunge, Dow Jones Newswires; 312-750-4117; [email protected] (END) Dow Jones Newswires July 08, 2010 17:18 ET (21:18 GMT)