NYSE to offer high-speed electronic trading
November 6, 1999
NYSE to offer high-speed electronic trading next year
Bowing to competition, the two-century-old exchange will add the Internet service to its traditional floor trading.
By Philip Boroff
BLOOMBERG NEWS
BOCA RATON, Fla. - The New York Stock Exchange, under pressure from low-cost, high-speed electronic trading systems, plans to set up one of its own next year, its chairman said yesterday.
The exchange, upending 207 years of tradition, will allow small orders to be executed automatically without the aid of traders. The traders, known as specialists, maintain orderly markets in specific stocks, and they handle every trade made on the NYSE. That franchise gave the Big Board's 27 specialist firms a profit of $137 million in the second quarter.
Dramatic change "is not just desirable, it is absolutely essential" for the exchange, NYSE chairman Richard Grasso said in a speech at the Securities Industry Association's annual conference here.
The exchange will create an Internet-based electronic order book for the system. The NYSE has been under competitive pressure from fast-growing electronic communications networks, known as ECNs, that match buy and sell orders automatically.
Investors "want fast, low-cost executions in some categories of the market," Grasso said.
Under the planned service, to begin in the second quarter of 2000, orders of 1,000 shares or less routed electronically will have the option of being instantly executed. In the exchange's existing system, the specialist sometimes delivers better prices than the investors sought by giving brokers on the floor a chance to act on the orders. Under the new plan, investors could forgo price improvement in exchange for speed.
By some estimates, ECNs account for a third of Nasdaq Stock Market volume. Partly because of that, Nasdaq has surpassed the Big Board in daily volume. On Thursday, for example, Nasdaq traded 1.3 billion shares, about 112 million more than the NYSE.
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