I read the WSJ article. They estimated a 25% drop in commissions. Not sure where they pulled that out of, but it seems like it could result en una caida mas rapida?
NYSE To End Hybrid System
- Thread starter cstfx
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I read the WSJ article. They estimated a 25% drop in commissions. Not sure where they pulled that out of, but it seems like it could result en una caida mas rapida?
Thanks.
Great article. I'll post another older one I found - check it out.
Are you serious or? You can't really be gullible enough to think that the specialists will come back.
Too much money is made by the top tier firms with their order fragmenting algos to allow that.
I found this article.
BY Charles Gasparino.- former Wall Street Journal investigative reporter.
For a long time, no one wanted to trifle with Grasso â no one except Hank Paulson, anyway. The former Goldman CEO knew that no matter how much Spear, Leeds & Kellogg, his firmâs specialist unit, was earning during the Grasso years, Goldman could make more money if Grasso and the specialists were gone. Profits could be generated through a practice known as âinternalization,â in which big Wall Street trading desks internally do the specialistsâ job by matching buyers and sellers who would ordinarily be linked on the floor. The benefits of such an arrangement are enormous for a trading shop like Goldman, because it gets a sneak peek at the positions of its biggest clients: large institutional investment firms that trade huge blocks of stock each day.
Wall Street insiders have for years suspected that some of the huge profits pocketed by Goldmanâs savvy traders were in part derived from their getting an inside look at the trading positions of the firmâs buy-side clientele â a charge Goldman has denied. (âSimply not true,â a spokesman insists.) What it canât deny is that with Grasso enforcing the best-price rule, internalization remained a back-alley practice. With him gone, Goldman could do what it wanted.
Internalization, though, is just one aspect of how Goldman benefited from a Grasso-less stock exchange. Grasso, as most people know, was the best defender the floor ever had. Specialists who hated his imperious manner nonetheless owed him their jobs once cheap, efficient electronic-trading platforms came into vogue in the â90s. One of those systems, Archipelago, was funded by none other than Goldman Sachs.
As I show in my forthcoming book, King of the Club, Goldman had big plans for Archipelago almost from the moment it made its first investment in the late â90s. It was designed to compete directly with the NYSE and made noisy, deliberate attacks on the specialist system. Itâs also no coincidence that around the time Goldman made its investment in Archipelago, Paulson made his first direct assault on Grassoâs exchange leadership, pushing something known as the Central Limit Order Book (CLOB), which would have forced most of the big stocks listed at the exchange to be traded electronically. And because the exchange itself didnât have the technology at the time to complete those trades, were Paulson successful in wielding his CLOB, Goldman would make Archipelago available to fill the void.
Paulsonâs attempt to take over the exchange hit a roadblock, though: Grasso. In 1999 and 2000, the âlittle guy in the dark suitâ wasnât burdened by messy disclosures about his pay package or a probe of sleazy floor-trading practices. He went toe-to-toe with Paulson, who was joined by two other firms, Morgan Stanley and Merrill Lynch, a threesome Grasso dubbed the âMGM crew.â They were the biggest trading-order providers at the exchange, making them Grassoâs biggest customers. They were powerful Washington players as well, and they appealed to lawmakers to let them pull their trades from the floor and run them through computers.
Grasso counterattacked by engaging in a little class warfare: The floor was the great equalizer that forced Wall Street to treat all investors the same. What, he intimated, was to guarantee that Wall Street would send its orders to the computer when it could get the best price internally? And who would make sure all investors â not just Goldmanâs big clients at Fidelity â were getting the best price if he wasnât there watching the store? In the end, Grasso won.
He won the battle, that is, but not the war. Itâs no surprise that when the controversy surrounding Grassoâs pay was raging, Paulson launched the effort to get him out. Paulson has said that he did so to save the exchange; Grasso, he maintains, was a drag on business. The pay controversy was all-consuming. Large institutional investors were threatening to stop sending trades to a place that paid a regulator like a CEO. All of which might be true, but thatâs not really why Paulson, I believe, wanted Grasso out. Paulson saw big money in asserting his control over the exchange. He saw a merger with Archipelago, and Goldman running the show.
The specialist traders got destroyed, but Iâm not sure how much investors have benefited now that the NYSE is becoming the worldâs largest electronic marketplace.From what I hear, more trades are getting matched internally by Wall Street trading desks than ever before. How do I know? Just look at the percentage of NYSE-listed stocks that get matched by the exchange itself. Under Grasso, it was more than 80 percent; now itâs under 50.
I still canât believe itâs been four years since Grassoâs fall from grace. It seems like it was just yesterday. I remember calling him just a few weeks after the story broke. Grasso seemed like half the man I knew when he was running the Club. He was depressed and shell-shocked. He still couldnât fathom how he had gone, almost overnight, from the guy who rebuilt Wall Street after 9/11 to a universally reviled specter of corporate greed.
Our conversation then turned to Hank Paulson. By now, Grasso was calling him âthe snakeâ for leading the effort to remove him, and in a burst of clarity he predicted that Goldman would find a way to impose its will on the Club in a matter of months.
I sat and listened and then began to make some calls, including one to the Goldman flack.
BY Charles Gasparino.- former Wall Street Journal investigative reporter.
For a long time, no one wanted to trifle with Grasso â no one except Hank Paulson, anyway. The former Goldman CEO knew that no matter how much Spear, Leeds & Kellogg, his firmâs specialist unit, was earning during the Grasso years, Goldman could make more money if Grasso and the specialists were gone. Profits could be generated through a practice known as âinternalization,â in which big Wall Street trading desks internally do the specialistsâ job by matching buyers and sellers who would ordinarily be linked on the floor. The benefits of such an arrangement are enormous for a trading shop like Goldman, because it gets a sneak peek at the positions of its biggest clients: large institutional investment firms that trade huge blocks of stock each day.
Wall Street insiders have for years suspected that some of the huge profits pocketed by Goldmanâs savvy traders were in part derived from their getting an inside look at the trading positions of the firmâs buy-side clientele â a charge Goldman has denied. (âSimply not true,â a spokesman insists.) What it canât deny is that with Grasso enforcing the best-price rule, internalization remained a back-alley practice. With him gone, Goldman could do what it wanted.
Internalization, though, is just one aspect of how Goldman benefited from a Grasso-less stock exchange. Grasso, as most people know, was the best defender the floor ever had. Specialists who hated his imperious manner nonetheless owed him their jobs once cheap, efficient electronic-trading platforms came into vogue in the â90s. One of those systems, Archipelago, was funded by none other than Goldman Sachs.
As I show in my forthcoming book, King of the Club, Goldman had big plans for Archipelago almost from the moment it made its first investment in the late â90s. It was designed to compete directly with the NYSE and made noisy, deliberate attacks on the specialist system. Itâs also no coincidence that around the time Goldman made its investment in Archipelago, Paulson made his first direct assault on Grassoâs exchange leadership, pushing something known as the Central Limit Order Book (CLOB), which would have forced most of the big stocks listed at the exchange to be traded electronically. And because the exchange itself didnât have the technology at the time to complete those trades, were Paulson successful in wielding his CLOB, Goldman would make Archipelago available to fill the void.
Paulsonâs attempt to take over the exchange hit a roadblock, though: Grasso. In 1999 and 2000, the âlittle guy in the dark suitâ wasnât burdened by messy disclosures about his pay package or a probe of sleazy floor-trading practices. He went toe-to-toe with Paulson, who was joined by two other firms, Morgan Stanley and Merrill Lynch, a threesome Grasso dubbed the âMGM crew.â They were the biggest trading-order providers at the exchange, making them Grassoâs biggest customers. They were powerful Washington players as well, and they appealed to lawmakers to let them pull their trades from the floor and run them through computers.
Grasso counterattacked by engaging in a little class warfare: The floor was the great equalizer that forced Wall Street to treat all investors the same. What, he intimated, was to guarantee that Wall Street would send its orders to the computer when it could get the best price internally? And who would make sure all investors â not just Goldmanâs big clients at Fidelity â were getting the best price if he wasnât there watching the store? In the end, Grasso won.
He won the battle, that is, but not the war. Itâs no surprise that when the controversy surrounding Grassoâs pay was raging, Paulson launched the effort to get him out. Paulson has said that he did so to save the exchange; Grasso, he maintains, was a drag on business. The pay controversy was all-consuming. Large institutional investors were threatening to stop sending trades to a place that paid a regulator like a CEO. All of which might be true, but thatâs not really why Paulson, I believe, wanted Grasso out. Paulson saw big money in asserting his control over the exchange. He saw a merger with Archipelago, and Goldman running the show.
The specialist traders got destroyed, but Iâm not sure how much investors have benefited now that the NYSE is becoming the worldâs largest electronic marketplace.From what I hear, more trades are getting matched internally by Wall Street trading desks than ever before. How do I know? Just look at the percentage of NYSE-listed stocks that get matched by the exchange itself. Under Grasso, it was more than 80 percent; now itâs under 50.
I still canât believe itâs been four years since Grassoâs fall from grace. It seems like it was just yesterday. I remember calling him just a few weeks after the story broke. Grasso seemed like half the man I knew when he was running the Club. He was depressed and shell-shocked. He still couldnât fathom how he had gone, almost overnight, from the guy who rebuilt Wall Street after 9/11 to a universally reviled specter of corporate greed.
Our conversation then turned to Hank Paulson. By now, Grasso was calling him âthe snakeâ for leading the effort to remove him, and in a burst of clarity he predicted that Goldman would find a way to impose its will on the Club in a matter of months.
I sat and listened and then began to make some calls, including one to the Goldman flack.