The New York Stock Exchange has sparked a storm in the US stock trading community with an effort to lure more retail investors with better prices on trades through a program that mimics the so-called dark pools used by large banks and institutions.
US regulators are due to decide by Friday whether to approve the move, which rivals are likely to emulate to boost business at a time when overall market volume has been flagging.
However, some big brokers have challenged the approach, fearing they will lose profitable retail business.
The Big Board is looking to become the first stock exchange that is allowed to offer retail investors better prices than those available to pension managers and hedge funds.
Handling individuals’ stock trading is prized as a source of short-term profit, and mainly flows through a handful of banks and electronic-trading firms that pay fees to retail brokers for the chance to fill stock orders before they arrive at exchanges.
n some cases those firms execute trades at prices that beat the going market rate by fractions of a cent, something exchanges have been barred from doing.
The business has helped banks and trading firms such as Knight Capital, Citadel, Citigroup and UBS capture market share from established exchanges such as NYSE Euronext and Nasdaq OMX.
These banks and trading firms in the past decade have built a thriving business handling individual investors’ stock orders.
Some of those firms have criticised the NYSE proposal for upending one of the basic pillars of a financial exchange—providing a level playing field for all participants—and for creating new wrinkles in the already complex trading landscape by improving prices by fractions of a cent.