CASH EQuITIeS

Designated Market Makers

Unique Market Model
Only NYSE and NYSE Amex equities markets offer a unique combination of high-tech automation for low latency and complete anonymity as well as high-touch participation by market professionals for orderly opens and closes, lower volatility, deeper liquidity and price improvement opportunities throughout the trading day.

Market structure with the following benets:

Transparency Low

Designated Market Makers

As part of an initiative to further enhance the performance, quality and competitiveness of NYSE and NYSE Amex markets, the role of the Designated Market Maker (DMM) succeeded the Specialist. The NYSE features both a physical auction managed by DMMs and a completely automated auction that includes algorithmic quotes from DMMs and other market participants. DMMs: Have true obligations to maintain a fair and orderly market in their stocks, quote at the NBBO a specied percentage of the time, and facilitate price discovery throughout the day as well as at the open, close and in periods of signicant imbalances and high volatility; Provide price improvement and match incoming orders based on a preprogrammed Capital Commitment Schedule, which has been added to the NYSE Display Book, minimizing order latency. DMMs and their algorithms do not receive a look at incoming orders. This ensures that an intermediary does not see orders rst, and that DMMs compete as a market participant; Are on parity with quotes from oor brokers and those on the Display Book, encouraging DMM participation and higher market quality. This high touch approach is important for discovering and improving prices, dampening volatility, adding liquidity and enhancing value.

latency DMM afrmative obligations Price improvement Deep liquidity Competitive pricing/quoting

DMM Activity
% 40 35 30 25 20 15 10 5 0 7.9 2.6 9.1

Comparison of Specialist vs. DMM

Specialist (Old) DMM (New) Market maker with quoting obligation, no advanced look Parity Afrmative obligations, open, close Addition of Capital Commitment Schedule (CCS) Economic incentive tied to providing liquidity
33.9

DMM Participation DMM % Time at NBBO

Trading Responsibility Priority Obligations Technology Economics

Agency responsibility, visibility to all incoming orders Yield on all orders Afrmative and negative obligations, open, close S-quotes, SAPI Economic incentive

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