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Notes
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1 At the time of the conference, Mr. Cormack was Executive Vice President at the NYSE Group, Inc.
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2 At the time of the conference, Mr. Harris was Senior Vice President at the American Stock Exchange.
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3 The ISE entered equity trading with the launch of the ISE Stock Exchange in September 2006.
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4 The industry’s demand for the trading of single stock futures in the U.S. waned after an initial flurry of interest earlier in this decade. This gained momentum with an agreement between the Securities and Exchange Commission and the Commodities Futures Trading Commission on initial and maintenance margin requirements. The expectation then was that several U.S. equity markets would enter the futures markets. Nasdaq planned this through Nasdaq Liffe (NQLX), a joint venture between itself and LIFFE, the derivatives exchange based in the U.K. Nasdaq later withdrew from this joint venture. Still, with margins on stock trading shrinking in this decade, U.S. exchanges were anxiously looking for new ways to satisfy shareholders. That is why trading in a variety of securities, both in the U.S. and overseas, was more acceptable to U.S. stock exchanges than in the past. The NYSE added the LIFFE futures market in London, when it completed its merger with Euronext in April 2007.
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5 John Thain has publicly stated that the futures business in the U.S. is very attractive because it has higher margins than the cash business. He has noted the strong growth rates of various products traded by the Chicago Mercantile Exchange.
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6 This is a strategy that involves buying an underlying stock or index and writing – that is, selling –- a call against it.
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7 The American Stock Exchange announced on March 5, 2007 that its AEMI platform – an acronym for Auction and Electronic Market Integration – was fully rolled out and it complied with the trading phase of Reg. NMS, which commenced that same day. AEMI was launched on November 2006.
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8 BATS Trading, operator of an ECN founded in 2005, is an example. The growth in trading volume at this ECN is attributed in part to its aggressive rebate schedules. For example, at the start of 2007, in a special promotion, BATS paid more in trading rebates than it gathered in fees. BATS’ average daily volume more than doubled in January. It matched just over 8% of all shares traded in Nasdaq stocks, up from 4% in the previous month.
- 9.
9 Options trading on the ISE, which in April 2007 agreed to sell itself to Deutsche Börse AG for $2.8 billion, has grown since the conference. The ISE reported an average of 2.7 million contracts were traded in April 2007, a 14.7% percent increase over the same month a year ago. Overall, investors trading 54.6 million options at the ISE in April 2007, compared with 45.2 million contracts in April 2006, a 20.8% percent increase.
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10 As of October 2007, the New York Stock Exchange matched some 40% percent of the volume of all NYSE-listed trades, according to industry analyst Richard Repetto and published statistics.
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11 Hyndman is referring to Nasdaq’s “‘touched”’ trade executions. Nasdaq says these “‘touched”’ trades represents total share volume of Nasdaq or NYSE-listed securities executed on the Nasdaq Market Center and the INET book – plus volume of shares routed to other market centers for execution – as a percentage of consolidated Nasdaq or NYSE market volume. Nasdaq reported that touched market share in NYSE-listed securities rose to 33.3% percent in December 2006, from 31.5% percent in November and 16.1% percent December 2005.
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12 Nasdaq says its overall market share in the volume of NYSE stocks traded – as distinct from its touched trades market share – was 15.5% percent, as of April, 2007, compared with a year ago share volume of 8% percent. Nasdaq’s touched market share measures its “‘matched’” shares and the shares Nasdaq routes to other venues. This touched market share is also one level of trading activity that generates transaction revenue for Nasdaq.
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13 The “‘take-out”’ charge is the term used to describe the Nasdaq fee traders pay for executing orders – that is, electronically taking-out shares – on Nasdaq itself. It is the opposite term for “‘rebates,”’ which Nasdaq pays traders for adding shares – that is, liquidity – to its system.
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14 Josh Levine, co-founder of Island ECN, is regarded as a talented computer programmer.
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15 On June 5, 2007, NASDAQ announced the launch of its Intraday Cross (as well as Post-Close Cross.) The Intraday Cross was designed for institutional-sized orders seeking liquidity and anonymity.
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16 On April 4, 2007, NYSE Euronext was launched. It is the holding company created by the combination of NYSE Group, Inc. and Paris-based Euronext NV. Nasdaq’s $5.3 billion hostile bid for the London Stock Exchange, was rejected earlier in 2007.
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Pisani, B., Atkin, D., Cormack, M., Eskandar, A., Harris, D., Krell, D. (2008). Intermarket Competition: Trading Decisions. In: Schwartz, R.A., Colaninno, A., Byrne, J.A. (eds) Competition in a Consolidating Environment. Zicklin School of Business Financial Markets Series. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-75943-2_3
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