NYSE plans to slash costs for retail investors 

The new owners of the New York Stock Exchange are planning to slash costs for some orders coming from retail investors in a bid to bring more trading back from “dark pools” and other off-exchange venues, according to a rule change filed Tuesday.

The NYSE Group, owned since last year by Atlanta-based Intercontinental Exchange Inc., will waive access fees for midpoint liquidity orders originating from retail investors. Midpoint orders trade at the point between the best bid and offer, giving an investor a slightly better price than what is publicly displayed.

The change could be costly for the NYSE if the initiative takes off. Under the prevailing maker-taker system in the markets, most exchanges make money off trading by paying a rebate to traders willing to place orders on an exchange and charging a slightly higher price to those buying.

By waiving fees for midpoint liquidity orders, NYSE will pay a rebate without charging the other side to buy.

The rule change will primarily relate to the way wholesalers, such as KCG Holdings Inc. and Citigroup Inc. ’s Automated Trading Desk, send orders to the NYSE.

The change would encourage more retail orders on the exchange, “enhancing order execution opportunities for all participants, but specifically retail investors,” NYSE’s filing said.

Wholesalers pay brokerages for the right to execute retail orders. Many of those orders are matched from within their inventories of stock, but a portion end up sent out to other venues for execution. Exchanges are the last port of call for an unfilled order because of the high fees for execution, analysts say.

NYSE is trying to shake up this arrangement, making it cheaper to send those unfilled orders to the exchange rather than dark pools and other venues, according to people familiar with the plans. The hope is that by drawing more retail orders onto the exchange, they will draw in more of other traders looking to trade against retail investors, according to an executive.

The pricing change was filed with the Securities and Exchange Commission on Tuesday and will be implemented January 2, the company said.

 

Source: wsj – NYSE plans to slash costs for retail investors

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