D Orders: The Floor Broker’s modern trading tool

NYSE Floor Brokers operate on an agency basis on behalf of institutional investors and broker-dealers, including market participants representing retail investor interest. Traditionally, Floor Brokers at the NYSE had substantial discretion and flexibility when representing customer orders manually on the trading floor. Today, NYSE blends modern electronic trading with human judgment and provides electronic tools which enhance the ability for Floor Brokers to perform their traditional agency function in today's fast-paced markets.

One of those tools is the D Order which is short for Discretionary Order . D Orders use technology to replicate the Floor Broker's traditional manual role to exercise discretion at what price a Floor Broker is willing to buy or sell in reaction to contra-side orders, both in continuous trading and in auctions. Because D Orders permit Floor Brokers to interact with contra-side orders at a range of prices, they offer additional flexibility over Market on Close orders (MOCs) and Limit on Close orders (LOCs) residing in the electronic order book.

How D Orders work

While D Orders are available for use throughout the trading day, most executions occur in the closing auction, where they are known as Closing D Orders. At 3:50 p.m., Closing D Orders eligible to participate in the closing auction are added to the order imbalance feed at their discretionary price range. Closing D Orders can also be submitted, modified or cancelled up to 3:59:50 p.m. These distinct features of Closing D Orders are designed to facilitate the Floor Broker's traditional agency role on behalf of larger institutional interest, allowing Floor Brokers to work in conjunction with their customer to find larger liquidity opportunities.

There are no restrictions on which side of the market Closing D Orders may be entered and, along with other order types or market events, a Closing D Order can "flip" the imbalance for a closing auction from one direction to another. This dynamic interaction allows liquidity to build upon itself and creates opportunities for substantial size to trade in the closing auction.

Auction benefit

The NYSE Trading Floor plays an important role in the closing auction, and interest represented via the floor currently contributes more than 40% of total NYSE Closing Auction volume. At the same time, total volume in the close has grown to more than 10% of NYSE-listed volume, larger than any other auction and most other trading venues. The NYSE Trading Floor, and tools such as Closing D Orders, help investors maximize the benefits of the NYSE closing auction, the largest single daily liquidity event in an increasingly fragmented market.

D Order Innovation

NYSE is currently upgrading its existing floor broker technology to offer Floor Brokers a lower latency, lower friction path to the NYSE electronic order book. This seamless order entry approach allows clients to modify or cancel orders directly and eliminates arbitrary legacy restrictions such as the maximum number of orders entered in a single basket. NYSE member firms can work with their floor brokers to connect to this new order entry path via a common OMS or establish connectivity through an OMS of their choice. Once on the NYSE order book, member firms will continue to benefit from NYSE’s Parity/Priority Allocation model designed to promote deep liquidity and superior market quality by sharing the allocation among those who post the best price, rather than how quickly they place the order, thereby delivering better fill rates, lower execution costs, and the ability to share executions at the same price.