NYSE, Bids Trading start trading on Block Exchange

The New York Block Exchange is a joint venture between the Big Board and BIDS Holdings LP, an equity trading network owned by 11 brokerage firms including Goldman Sachs Group Inc. and Credit Suisse Group AG. The NYBX will connect NYSE members and Bids Trading clients, who handle some 3 billion shares daily.

NYBX is one of four systems NYSE Euronext hopes will help draw orders for large blocks of stocks at its U.S. and European markets. The proliferation of electronic trading has made it harder for investors to handle large orders without sparking a swing in stock prices, which can lead to higher trading costs.

“We are responding to problems clients are facing to find liquidity,” Larry Leibowitz, NYSE Euronext's head of U.S. markets, said in an interview Thursday. “We're experimenting with different ways to aggregate liquidity.”

Block trades, defined by the exchange as transactions of 10,000 shares or more, have dropped by half since 2006. In July, the Big Board introduced Block Talk, a system that lets floor brokers electronically find others interested in executing large orders.

NYSE is paying brokerages rebates this month to draw volume into the year-old Matchpoint system, which makes it easier for traders to co-ordinate purchases and sales for baskets of multiple stocks. Next week, the SmartPool system will begin trading stocks from 15 European markets after gaining approval from the U.K. Financial Services Authority.

“If you're the mutual fund investor that finds a more efficient way to trade, those are returns that you're now able to capture,” said Tim Mahoney, Bids Trading chief executive officer and a 27-year veteran of Merrill Lynch & Co.'s money management unit. “We're in an environment where all those basis points are incredibility important.”

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