[13687]
June 28, 2001
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 21-01
SEC RULES COMMITTEE No. 49-01
RE: INSTITUTE LETTER TO NYSE ON RECOMMENDED CHANGES TO
INSTITUTIONAL XPRESS SYSTEM
As we previously informed you,1 on May 7, the New York Stock Exchange sent a letter
to the Institute responding to the Institute’s recommendations on the NYSE’s Institutional
XPress system intended to address problems that mutual funds and other institutional investors
have had trading large blocks of securities on the Exchange since the implementation of
decimalization.
The Institute has sent a letter to the NYSE (a copy of which is attached) addressing some
of the points made by the NYSE in its response. In particular, the letter states that the Institute
strongly supports the goals of the NYSE’s recent initiatives directed at the needs of institutional
investors that are outlined in the NYSE letter, particularly providing greater transparency of
market information, solving the “go-along” problem, providing greater systems execution
capability for large orders and reducing market impact and other execution costs. However, the
letter reiterates that the Institute does not believe these initiatives will effectively address the
most pressing concerns of our members, in particular, the inadequate protection of limit orders
placed on the Exchange’s limit order book and the ability of investors to effectively interact with
those orders.
The letter also reiterates that the Institute does not believe that decimalization has
caused the problems that institutional investors are facing when trading on the Exchange, but
that decimalization simply has made them more apparent. Finally, the letter addresses the
NYSE’s argument that “what is ‘trading ahead’ to one institutional investor is ‘price
improvement’ for another” by reiterating that Institute members have consistently reported that
they would gladly forego price improvement in order to receive protection for their displayed
orders and the ability to freely interact with orders on the Exchange’s limit order book.
Ari Burstein
Associate Counsel
Attachment
1 See Memorandum to Equity Markets Advisory Committee No. 13-01 and SEC Rules Committee No. 36-01 dated
May 9, 2001.
2Attachment (in .pdf format)