NYSE Wins Approval for Wider Use of Automated Trading Systems

The New York Stock Exchange won approval Wednesday to adopt wider use of automated trading systems that are bringing the world’s largest stock market into the digital age.

The Securities and Exchange Commission approved the NYSE’s “hybrid market” plan -- an attempt to blend the Big Board’s traditional floor-based auction market with the sort of high-tech execution systems that already dominate securities trading in virtually every other major market in the world.

“The hybrid market will increase efficiencies by marrying the best of electronic trading and the auction market,” said NYSE Group Chief Executive John Thain in a statement.

Already underway in a pilot program since December, the hybrid is now cleared for roll-out to all NYSE-listed stocks representing market capital of $22.5 trillion, the NYSE said.

Last month, the NYSE completed its acquisition of electronic trading innovator Archipelago Holdings.

The deal transformed the 213-year-old NYSE from a private club into a public company, now known as NYSE Group Inc., and ushered in a new era of rivalry with Nasdaq Stock Market Inc., the all-electronic equities exchange.

The Archipelago deal and the hybrid market both emerged amid pressure for NYSE modernization from the SEC, which last year adopted a sweeping set of stock trading and pricing rules known as Regulation National Market System, or NMS.

The multifaceted rule’s most controversial part, known as “order protection,” will bar traders from ignoring the best price for a stock when executing a buy or sell order, as long as the price is available on a fast, automated market.

If the best quoted price is only available on a so-called slow market, like the NYSE’s traditional trading floor, then it may be bypassed, under the SEC rule.

Regulation NMS, adopted April 2005, put heavy pressure on the NYSE to move toward more automated trading.

Its hybrid plan will expand its existing automatic execution system, known as Direct Plus, as well as bring into the system more floor members and specialists, who make markets in specific stocks.

NYSE shares fell $3.50, to $80.40.