The New York Stock Exchange plans to exempt specialists from price improvement requirements to help them compete in the ETF market. In order to participate algorithmically and attract the orders to trade against, specialists must be represented in at least 1,000 shares for incoming active orders and 500 shares for all other securities and provide adequate price improvement based on several spread tiers. Several specialists had complained to the exchange that ETFs trade and change prices too rapidly to let specialists meet these requirements and respond to orders. Neither floor brokerages nor members have to meet these requirements, which puts specialists at a competitive disadvantage. Exchange officials believe that exempting specialists from these parameters won’t have any negative effect on how ETFs trade at the NYSE. “Specialists have increasingly focused large portions of the businesses at ETFs, and this will definitely help many position themselves to compete,” one trader said. The Securities and Exchange Commission still has to approve the change.
