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From: TFF	12/17/2004 4:27:50 PM
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Proposal could end NYSE floor trading By David Wighton in New York Published: December 17 2004 02:00 \| Last updated: December 17 2004 02:00 A controversial proposal unveiled by the Securities and Exchange Commission this week could spell the end of traditional share trading on the floor of the New York Stock Exchange, its chief executive warned yesterday. John Thain said it would be "very difficult ... to maintain the auction process" if the proposal was adopted. It would "force everyone into a purely electronic model" he said on a media conference call. Mr Thain's first public statement on the issue underlined the depth of the NYSE's concerns about the proposal which the five SEC commissioners voted to publish for comment on Wednesday. The proposal would ban a stock trade being done on one market at a worse price than that on offer anywhere in the displayed order book of another market. The SEC is asking for comment on whether this would be preferable to its original suggestion which would limit such "price protection" to the best prices on offer at each market. Mr Thain said that if the new proposal was implemented the human intervention involved in the auction process would be impractical, particularly in circumstances where there was disruption in the market, a big order imbalance or a dramatic change in price. These are exactly the circumstances in which supporters of the NYSE auction model say it adds value for investors. Mr Thain said the new proposal would make it very difficult to implement the NYSE's planned "hybrid model" which would combine the auction process with electronic trading. The NYSE strongly supported the SEC's original blueprint Mr Thain said but the alternative proposal would harm investors by reducing competition between markets. This was because under the new proposal it would not matter on which market an investor placed an order because it would be price protected wherever it was. He also said it would be likely to lead to reduced liquidity because investors would be less keen to display orders. "I don't think centralising and nationalising the market is in the interests of investors." The original proposals were published in February then revised in May. But three weeks ago it emerged that SEC officials were recommending that price protection be extended to all displayed orders and that the SEC commissioners would be asked to vote on the plan without further consultation. After lobbying, the commissioners agreed to another 30 days of public comment.

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