February 8, 2010
Just have one comment regarding VWAP transactions and 10b18 repurchasers. Since the popularity of dark pools has gone from 10% to current 35% of the volume on the NYSE, vwap is becoming irrelevant as a metric to guide how well an execution is. By the time these proposed changes go into effect Dark pools could be 50-60% of the volume in any individual stock. Brokers buying back stock cannot buy in dark pulls,.
Since the broker has no way of controlling the "tick" on an execution within a dark pool, issuers are excluded from participating in this growing % of volume. Many of the prints that occur are included in the vwap calculation but it is volume that the Issuer can’t compete for. If a certain segment of the market can’t participate in dark pools, they should be eliminated to make more of an auction market and make it fair for all investors.
I think the tick rule is becoming more and more anachronistic. Since we have massive volatility, smaller volumes that that issuer can purchase in, and stocks that trade in pennies and half pennies we are at a point where we need to examine how feasible this will be to require the companies to comply.
Hugh Milmoe
Stifel, Nicolaus & Company
One South Street, 15th Floor
Baltimore, MD 21202