The New York Stock Exchange has moved some exchange traded funds (ETFs) to Arca. The decision was re-enforced by fund flows and the ETF makers. Arca gives rapid electronic trading and will take more traffic off the physical trading floor. The biggest concern is if this new trading system will hurt the liquidity in the newly listed ETFs, reports Matt Hougan for Index Universe.
Investors who favor the traditional trading floor argue that having a specialist on hand helps the newer and lightly traded ETFs to maintain market liquidity. Proponents of electronic trading highlight the point that the NYSE Arca will have a highly trained, assigned lead market maker who will be required to maintain a healthy market within each security. Lead market makers also must represent a continuous, two-sided quote for each security.
Like so many other mediums, electronic everything is the wave of the future. Digital trading is no exception. Floor specialists’ positions have been cut in half already, and that trend is likely to continue, according to one insider.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.