The Corner for Dec. 20, 2013

On the New York Stock Exchange alone, nearly 75 percent of the orders received each day are processed through a computerized trading and execution system called The Universal Trading Platform (UTP). Broker-dealers use this computerized order routing system to choose the destination of an order and the route that order will take. An order can be routed directly to the appropriate trading post on the floor of the exchange, or it can be sent to the brokerage firm’s house booth for handling by the exchange member (the floor commission broker) who represents the broker-dealer at the NYSE. Once the order is received on the floor it is executed and using the same automated routing system sends an execution report back to the firm that submitted the order. The broker-dealer then notifies the registered representative (stockbroker), who notifies the customer that the order was executed. Orders executed through UTP are often confirmed back to the broker in less than 10 seconds.

According to the NYSE, “UTP replaces the NYSE’s matching engine, Display Book (DBK®) and supporting database Super Display Book (SDBK). UTP provides a core standardized matching engine technology platform across all NYSE Euronext markets and is in place at NYSE ARCA, NYSE Euronext Cash, NYSE Liffe and NYSE Amex and ARCA Options.”

All types of orders can be sent to a market through the computerized system, including equity, market limit, odd-lot (less than 100 shares) and options orders. These orders can be sent through the system either pre-opening or post-opening or market on close. As orders are received pre-opening (that is, before the opening of trading on NYSE that day), they are automatically paired by computer with other orders and executed at the opening of the market. Any order that cannot be matched before the opening is given to the specialist or nowadays designated market makers to handle. All NYSE-listed stocks are eligible for trading on UTP.

In addition to UTP, NYSE has also created several other order transmission systems. The Broker Booth Support System (BBSS) is a system where larger orders are delivered directly to a floor broker who then executes the order personally. In addition, hand held devices are being used to provide floor brokers with fast, efficient mechanisms to receive orders, send reports and transmit messages back to their booths (places around the exchange floor where individual floor brokers and their clerks are located). Linkage of the Brooker Booth Support System and hand held device systems to the exchange’s on-line comparison system provides real time submission comparison to member firms.

Quote of the week: “You can’t turn back the clock, but you can wind it up again” — Bonnie Pruden

Bart Ward is the chief executive officer of Ward & Co. Ltd., an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.

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