NEW YORK, June 5 (Reuters) - New York Stock Exchange needs to simplify its structure to expand its business and bolster investor confidence in the markets, Jeffrey Sprecher, chief executive of Big Board parent Intercontinental Exchange Inc , said on Thursday.
The stock market has become overly complex and the NYSE needs to be proactive in reducing that complexity, Sprecher said at in industry conference in New York.
As an example for the NYSE and others to follow, he pointed to upstart alternative trading system IEX Group, which has only four order types, does not use rebates to attract orders and has electronic “speed bumps” to level the playing field between high-speed electronic traders and others in the market.
“I look at it (IEX) and I admire what they’ve done and we’re behind at the New York Stock Exchange,” Sprecher said at the conference, sponsored by Sandler O‘Neill + Partners.
The NYSE, like other U.S. stock exchanges, has scores of order types, many of them used by high-frequency traders to maximize the amount of rebates they can get from the exchanges.
ICE, which closed its $11 billion deal to buy NYSE Euronext in November, plans to cut at least 15 order types from the NYSE, one of the company’s executives said on Tuesday.
The structure of the stock markets has come under increased scrutiny after the March 31 publication of “Flash Boys: A Wall Street Revolt,” a book by Michael Lewis that argues the U.S. stock market is rigged, with exchanges giving special access to high-speed electronic trading firms.
Also on Thursday, the top U.S. securities regulator said she was developing rules that target high-speed traders, less transparent trading venues and order-routing practices, to promote fairness for investors, shine more light on the markets and bolster stability.
Sprecher said he supported the proposed regulations but that exchanges do not need to wait for new rules to make changes that would benefit the market.
“I just want to do the right things and things that will bring confidence back,” he said, pointing to the example of IEX and its CEO, Brad Katsuyama, who was the main protagonist in “Flash Boys.”
“We need to get with the program and be doing the same kind of things that Brad is doing and he’s not done that because of a regulatory mandate. He’s not done that because somebody forced him to. He saw an opportunity - he saw the same opportunity that I saw, which is to grow these markets by making them easier to understand and less complex.” (Reporting by John McCrank; additional reporting by Herb Lash)