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4 Firms Acting as Designated Market Makers on NYSE American

October 27, 2017

 

While this may not seem too important for cannabis investors, for those who trade cannabis-related companies on the NYSE American exchange like 22nd Century Group, Inc. (NYSE:XXII) or India Globalization Capital, Inc. (NYSE:IGC), this is extremely important. 

 

What is the NYSE American Exchange?

 

To clear up any confusions regarding the name NYSE American, NYSE American is the NYSE's exchange for small to mid-cap companies that "blends unique features derived from the NYSE, such as electronic Designated Market Makers (e-DMMs) with quoting obligations for each NYSE American-listed company, with NYSE Arca’s fully electronic price/time priority execution model."

 

This exchange was formerly known as the NYSE MKT, but was changed to reflect its history as the American Stock Exchange. In 2008, the American Stock Exchange was acquired by the NYSE Euronext group and soon became renamed the NYSE MKT in 2012 as a part of the integrated exchange operator.

 

Since then, the entire NYSE Euronext group has been acquired by Intercontinental Exchange Inc. (NYSE:ICE) for over $8 billion. 

 

What is a Designated Market Maker?

 

According to the NYSE, Designated Market Makers or DMMs, are "the cornerstone of the NYSE market model." Formerly known as “Specialists”, DMMs have obligations for maintaining fair and orderly markets for their assigned securities. They operate both manually and electronically to facilitate price discovery during market openings, closings and during periods of substantial trading imbalances or instability.

 

Since the NYSE American exchange made the move to electronic-only trading, the DMMs are referred to as e-DMMs due to their electronic-only nature. This "high touch" approach is crucial for improving prices, dampening volatility, adding liquidity and enhancing value.

 

DMMs apply keen judgment to knowledge of dynamic trading systems, macroeconomic news and industry specific intelligence, to make their trading decisions. The DMMs are a valuable resource for our listed company community, providing regular communication, making capital commitments, maintaining market integrity, and stepping in during special situations.

 

Which Firms are e-DMMs for NYSE American?

 

  • Brendan E. Cryan & Co: Brendan E. Cryan And Company, LLC is a private broker dealer formed in March of 1999. According to FINRA, one of the company's major owners is Universal Capital Holdings Group Inc., a wholly owned subsidiary of Ding Feng International Investment Limited. Universal Capital Holdings Group completed its acquisition of Brendan E. Cryan and Company LLC in December of 2016. “The Brendan Cryan firm has deep expertise in market making and a long history of providing world class trading services to help its clients meet their investment goals,” said Jiaming Li, president of Universal Capital Holdings Group.

  • Citadel Securities LLC: Citadel Securities LLC is a private broker dealer formed in July of 2001. Citadel Securities LLC is a self-described "award-winning global market maker across a broad array of fixed income and equity products."

  • J Streicher & Co. LLC: J Streicher & Co. LLC is "the oldest specialist (DMM) unit in the industry." Formed in January of 1997, this broker dealer buys and sells securities such as stocks, bonds, mutual funds, and other investment products according to Bloomberg.

  • Virtu Financial Capital Markets: Last but not least, is Virtu Financial Capital Markets LLC, a subsidiary of Virtu Financial, Inc. (NASDAQ:VIRT), is a publicly-traded broker dealer combining "market structure expertise and execution technology to provide deep liquidity and competitive bids and offers in over 19,000 securities, at over 235 venues and unrivaled execution technology to our clients, while creating more efficient and stable markets worldwide."

 

 

How Do DMMs Affect Me and My Trading?

 

DMMs are not just trading firms buying and selling for no reason. In fact, DMMs have a long list of obligations to uphold in order to fulfill their roles as NYSE American DMMs. According to the DMM fact sheet from the NYSE, DMMs:

  • Have true obligations to maintain a fair and orderly market in their stocks, quote at the NBBO a specified percentage of the time, and facilitate price discovery throughout the day as well as at the open, close and in periods of significant imbalances and high volatility;

  • Provide price improvement and match incoming orders based on a preprogrammed Capital Commitment Schedule, which has been added to the NYSE Display Book, minimizing order latency. DMMs and their algorithms do not receive a “look” at incoming orders. This ensures that an intermediary does not see orders first, and that DMMs compete as a market participant;

  • Are on parity with quotes from floor brokers and those on the Display Book, encouraging DMM participation and higher market quality.

Essentially, these DMMs help to minimize the bid-ask spread, and increase the depth of market for traders and investors. This allows investors to get in and out of the market rapidly with ease. Without them, it may not be so easy to buy 10,000 shares of XXII on the open market unless you happened to time your buy order with a another party's equivalently sized and priced sell order. 

 

Conclusion

 

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