NEW YORK (Reuters) - The New York Stock Exchange may cede some of its share in U.S. stocks in an effort to end large trading incentives after NYSE Euronext’s NYX.N $8.2 billion sale to IntercontinentalExchange (ICE.N) goes through, ICE’s chief executive said on Friday.
Jeff Sprecher has been critical of the practice by U.S. stock exchanges of giving large rebates on trading fees to attract order flow, calling the practice “ridiculous” during a talk at a global exchanges conference sponsored by Sandler O’Neill & Partners.
“I don’t think we should pay for order flow,” he said. “People talk about innovation and all they are really talking about is price cutting or front-running.”
Sprecher admitted that if NYSE did not compete for stock orders through rebates - which at some exchanges surpass the fees charged for trading - it would likely lose “a lot of market share,” but that the Big Board should take a leadership position on improving market structure.
He said it could also ultimately lead to a higher value per share for NYSE, as the exchange would be focusing on only trades that make money.
“I want to give the market share where we are losing money back to the competitors. I will welcome them to take money-losing business off of our books,” he said.
Exchanges have been losing market share to off-exchange venues where firms can avoid paying exchange fees, such as dark pools - private trading venues where traders remain anonymous - and brokerages that match orders internally. Off-exchange venues have around 40 percent market share, and exchanges have used rebates and other incentives to try to win back some of that business.
ICE charges premium prices for premium services and that has led to a higher share price for the Atlanta-based exchange, Sprecher said.
“I’ve never been one to try to get to the bottom and compete simply on price. I’ve tried to compete on technology and innovation and we continue to do that and it’s working pretty well for us.”
Reporting by John McCrank; Editing by Lisa Shumaker