NYSE pledges to keep trading floor as it goes hybrid

Click to follow
The Independent Online

The New York Stock Exchange trading floor is not under threat from a new electronic trading system being introduced today, the exchange's chief executive has promised.

The NYSE is rolling out a "hybrid" system which will increase the amount of super-fast transactions that can bypass the floor traders, but the biggest and most complex trades will still need the input of specialists on the floor, John Thain said.

"This is not going to be a Big Bang," he added, dismissing comparisons with the introduction of electronic trading in London in 1986, which led to the end of floor trading within six months. "We are creating a truly electronic system, but one that keeps what is good about the New York Stock Exchange. The specialists still add value, the brokers on the floor still add value. We trade 2,700 stocks, and the vast majority of those will trade better with brokers on the floor."

Increasing numbers of Wall Street players have expressed their frustration with the time it takes to deal on the NYSE in an age where many large trades are generated automatically by complex computer programs within hedge funds and on investment banks' trading desks.

As a result, the NYSE has been losing market share, as investors prefer to trade between themselves, via independent electronic crossing networks, or on the exchange's rival Nasdaq. In August, more than 30 per cent of the trading in NYSE-listed shares was conducted away from the exchange, a record amount.

The 109ft by 140ft trading floor of the New York Stock Exchange is one of the most recognisable corporate spaces in America. The current building in Broad Street, in the heart of Manhattan's financial district, was opened in 1903, but traders have met face-to-face under the auspices of the NYSE since it was incorporated in 1792.

Mr Thain said the human dimension added by the NYSE's floor traders comes into its own when market-moving news breaks and a company's shares threaten to move sharply in one direction or another. Floor traders can step in to ensure calm and to ensure that buyers and sellers are matched at the best price. Volatility is significantly lower than on purely electronic exchanges, he said.

The NYSE is proceeding with caution, and will introduce its hybrid system this morning for trading on just two stocks - American Express and America's largest publicly traded property company, Equity Office Properties Trust.

The move comes after a test-run of the new computer system last weekend, and a trial of hybrid trading in Lucent Technologies, the telecoms equipment company, which began in June.

In the Lucent trial, it transpired that all but the biggest trades were routed through the electronic system. And after last weekend's test, Mr Thain said he was confident that the new system could deal with up to 10 times the average trading volume.