Tabb said the NYSE is trying to get the floor back into the business of matching trades. "The liquidity on the floor has been fairly block-oriented. The problem isbecause most of the flow now is algorithmic, they can't interact with the stuff," says Tabb. "So the floor brokers have to put orders into reserve and use algorithms. They wind up getting lots of little fills and they're not as effective as if they traded larger blocks," explained Tabb. "They're trying to make the floor more relevant," said Tabb, adding they're trying to reconstitute the block business on the floor of the exchange. "And in this environment, folks are looking for ways to reconstitute order flow. Now whether the genie is out of the bottle and algorithms will completely eliminate the desire for any type of block," is the question, Tabb said. "The question is will it succeed and I think we'll know that in a couple of months," said Tabb.
In a conference call reviewing dark pools trends in 2008, Joe Gawronski, president and COO of Rosenblatt Securities, an institutional broker dealer that is an NYSE member, noted that exchanges are interacting more with dark pools and he expects this trend to continue in 2009.
"A particularly intriguing example of this convergence is the New York Block Exchange," said Gawronski, noting that it integrates its own block orders with the public and reserve order books of the NYSE. "It's the first time anyone has delivered on the powerful concept of marrying block discovery with a primary market that discovers prices rather than executing everything at the midpoint of the NBBO." Gawronski added NYBX merits watching in 2009.
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