Archive for July, 2007

American Stock Exchange Seats

One trades at $380,000. Best offer is now $405,000.

Payment for Participation looks promising for the third consecutive day.

Amex Payment for Participation

Today was the second day of a new program on the American Stock Exchange. The Exchange has eliminated the ability for ETF Specialists to charge commissions for orders. This elimination is almost meaningless in that only two or three of the ten Specialists were charging customers.

As a replacement the Amex will pay the Specs 4 cents per 100 shares for all volume in a specialists book minus those orders where the Spec has taken liquidity. The Specs will now be paid 24 cents per hundred for volume with which they interact. The goal is to financially persuade the Specs to make bigger and tighter markets so that the Amex will regain lost market share. The Amex currently retains roughly 4% market share in ETFs in spite of the fact that it is the birthplace of ETFs.

Looking at two days of vacation time volume and with only one specialist group, it looks as though there is hope. Of note is that for most of the Specs this will be found money and has no additional costs associated with it.

We will watch the numbers and give further reports as the numbers roll in. After two days, it looks promising.

Dormant/Half Year Resolution

Due to the press of business and my lack of energy, I have been remiss in not posting for some time. A pair of new hires commented that they actually read my blog so I will make the effort to post more frequently.

Seed Money: There have been several articles in the press recently discussing the plight of the Specialist community and their ability or willingness to seed new products.

My view is that there is still Seed money available but that the Specialist are now in a buyers market with a large present and future inventory of ETFs to choose from. As a result of this glut, the Specialists are able to pick and choose. The truly standout products still attract larger seed while the less sure products, especially coming from less established Issuers are receiving much lower initial seeds.

Another factor having an affect on the Specialists is the multiple venues currently available. NYSE, Amex, and ARCA with NASDAQ pushing at the door make it more difficult for Issuers to demand and receive large Seed commitments. Not all of the Specialist/Lead Market Makers are able to participate on every Exchange and it is still not clear which venue is the best for either issuers or Specialists. It should be year end 2007 before patterns start to be more clear. NYSE moving their ETFs to ARCA eliminates one venue but NASDAQ entering in late summer  adds another.

What at first appeared to be a quiet new issue summer is fast filling in. What the industry needs is two months with no issues. The Specialists could work off seed, take vacations and come back in September refreshed. MAybe we should adopt the school year concept.