[15574]
January 21, 2003
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 2-03
RE: DRAFT INSTITUTE COMMENT LETTER ON NYSE LIQUIDITY QUOTE PROPOSAL
As we previously informed you,1 the Securities and Exchange Commission has
published for comment a proposed rule change filed by the New York Stock Exchange relating
to the dissemination of “liquidity quotations.” The Institute has prepared a draft comment
letter (attached) on the proposal.
Comments on the proposed rule change must be received by the SEC no later than
January 23, 2003. If you have any comments on the Institute’s draft letter, please contact Ari
Burstein by phone at 202-371-5408 or by e-mail at aburstein@ici.org by January 22.
The draft letter supports the purposes behind the dissemination of a liquidity quote and
commends the NYSE for continuing to move towards an environment in which investors can
reach liquidity beyond the best bid and offer on the Exchange. Nevertheless, the draft letter
states that the proposal falls far short of establishing a system to facilitate efficient trading by
mutual funds and other institutional investors on the Exchange.
The draft letter also reiterates positions expressed by the Institute in prior comment
letters on the NYSE’s Institutional XPress system, specifically, that in order to create an efficient
trading system on the Exchange, the NYSE must address the inadequate protection of limit
orders placed on the Exchange’s limit order book and the inability of investors to effectively
interact with those orders.
Finally, the draft letter suggests that the NYSE establish a pilot program under the
liquidity quote proposal with a small number of securities where XPress orders attempting to
interact with a liquidity quote would be ineligible for price improvement. The draft letter states
that this would allow the NYSE and others to assess the effect of making XPress orders
ineligible for price improvement on the efficient execution of orders on the Exchange.
Ari Burstein
Associate Counsel
1 See Memorandum to Equity Markets Advisory Committee No. 1-03, dated January 8, 2003.
2
Attachment (in .pdf format)