NYSE Plans ‘Hybrid’ Market

New York Stock Exchange Chief Executive John A. Thain on Wednesday outlined a plan to quell critics of floor-based trading and preserve the NYSE’s dominance by meshing electronic and open outcry systems.

“We intend to run a hybrid,” Thain testified at a New York hearing on proposed regulatory changes hosted by Securities and Exchange Commission Chairman William H. Donaldson. “We still want to keep the benefits of the auction market.”

Thain is lobbying the SEC to scrap a rule change that would let investors opt for speed of trade over the best price, part of a proposed revamp that would mark the biggest regulatory overhaul of U.S. markets since 1975.

The Nasdaq Stock Market, which completes trades in less than a second, says the change in “trade through” would put electronic markets on a more equal footing with the Big Board. The NYSE claims that ending the trade-through rule may boost speed at a cost of as much as $3.5 billion a year for investors because of price distortions.

As part of the plan sketched out by Thain, the exchange plans to remove limits on the size and frequency of trades that investors can complete automatically at the displayed best price without the intervention of floor brokers and market-makers.