Officials of the New York and Philadelphia stock exchanges yesterday expressed satisfaction at the progress of the three-week-old Intermarket Trading System (ITS) experiment which electronically links the two exchanges, and claimed it probably will lead to the development of a national market system.
Philadelphia Stock Exchange President Elkins Weatherill said that, as of last Friday, "55.5 percent of the 153,800 shares that had been traded through the new system came from New York to Philadelphia and were executed in Philadelphia."
There had been some questions prior to the experiment whether the New York Stock Exchange would gain or lose business as a result of the hookup.
"This is the most significant part of the whole experiment - that a regional exchange is able to participate in the New York order flow," said Weatherill, who was on a panel discussing the national market system at the spring meeting of the Securities Industry Association.
"I am extremely enthusiastic about where we're going from here," the Philadelphia exchange chief said.
Robert Hall, who recently became the number to man at the NYSE, said the securities Industry "may be a lot further down the line on the national market system than anyone expected."
He said the industry was "well on the way" to the goals the Securities and Exchange Commission enunciated in January in a white paper on the national market system. Hall also expressed hope that, if the industry comes up with "alternative approaches" to meet the goals the SEC set out, the commission will not view these alternatives as "underconstructive and obstructionist."
The SEC said in its white paper that any national market system should include a composite quotation system, a market link-up and order routing system, and a "central file" to store customer limit orders to execute at a set price.
Although it contains some of these elements, the ITS is considered to fall short of what the SEC described, especially in the area of limit order protection.
Only 11 stocks are traded on the electronic linkage, which allows brokers to decide whether market makers in New York or Philadelphia are offering the best execution price. But this list soon will be expanded to 25 stocks, with a far larger expansion planned for later this year. The intermarket hook-up eventually will also include the American, Boston, Midwest and Pacific stock exchanges.
Separately, directors of the SIA, which represents the country's major brokerage and investment banking firms, approved plans to form a new organization budgeted at $1 million a year to represent the interests of stockholders on tax issues.
Tentatively called Investors for Tax Equity, the group will recruit members at annual dues of $15 thorugh brokerage firms. It also hopes to get other organizations such as the American Bankers Association and large corporations such as American Telephone & Telegraph to promote membership among stockholders.
Such an organization is needed because "nobody now represents individual shareholders in Washington on his or her tax matters," said Hixon Glore, a partner in Bacon, Whipple & Co., a Chicago brokerage firm, who was in charge of developing the idea for the SIA.
If the group gets off the ground, it presumably will serve as a lobbying army around the country to put pressure on Congress when it debates changes in the way investment income, or capital gains, is treated under the tax code.