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The outspoken Atlanta leader of the New York Stock Exchange broke a month-long silence about issues with U.S. stock markets Thursday and announced he is taking a “first step” toward reform.
Jeff Sprecher, the CEO of Atlanta-based IntercontinentalExchange, which owns the New York Stock Exchange, said he will take a “first step toward making our markets less complex” by voluntarily eliminating more than a dozen order types — the various ways that investors are able to place orders to buy or sell stock. Many of the order types, he said, were overly complicated, used to attract one investor over another and not truly useful in making the stock market operate fairly.
Sprecher also called for a moratorium on new order types. At ICE, he said, there was a “spirited internal debate” before the company decided that it would not enact several “innovative” new order types that would hurt ICE’s competition, but also further fragment the stock market and therefore harm investors.
“The New York Stock Exchange has a significant opportunity to offer solutions that rebuild confidence and protect shareholder value,” Sprecher said in a conference call with analysts. “And we believe that we can start by unilaterally reducing the excessive complexity that exists today, such as the proliferation of order types.”
Sprecher has spoken in the past about his desire to make the stock market more transparent. He alluded to it Thursday, when he said he has received “increasing support” for his views after seeing little in the past year.
The uptick in support came after the March publication of Michael Lewis’ new book, “Flash Boys,” put a spotlight on the complexity of the stock market. Sprecher said Thursday he thinks the New York Stock Exchange and other markets can be simplified.
Joe Saluzzi, co-head of equity trading at Themis Trading and author of “Broken Markets,” called Sprecher’s pronouncement a “great step.”
“He can’t fix everything overnight,” Saluzzi said. “He’s been very courageous. It’s great. There are definitely folks changing their views. Now is the time for change.”
But Larry Tabb, founder and CEO of the financial markets research firm Tabb Group, said some of the moves could have “adverse ramifications.”
Tabb said he supports changes that result in greater stock market transparency, but that the elimination of some trading methods could result in complicated workarounds that instead make things more opaque.
In addition to his moves on order types, Sprecher reiterated his opposition to maker-taker pricing, where markets pay rebates for trade activity.
“I personally think as long as we’re talking about changing it, we should abolish it,” he said.
But ICE cannot do so unilaterally, Sprecher said. If the company did, technology that routes trades would “basically leave us in the dust,” he said.
Tabb agreed, and said Sprecher is so far making the right moves.
“A lot of things in the market, Sprecher can’t do alone,” he said. “It’s a very competitive marketplace, and he would end up losing market share. It’s not easy.”
Sprecher also said he is experimenting with the effect of other changes on smaller exchanges ICE runs.
“You can rest assured that we are looking for opportunities, talking to a lot of people and looking at the assets that we have,” he said. “What I wanted to talk about … today were the things that the industry should be doing.”
Six months after it completed its acquisition of the New York Stock Exchange, ICE’s profit rose 94.1 percent, to $262 million in the first quarter. It was the first quarter that includes the exchange for the full period.
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