New NYSE Exec Pushes Electronic Trading
By Pradnya Joshi
STAFF WRITER
February 3, 2004
The New York Stock Exchange's new chief executive told members yesterday that he intends to move forward with a plan to allow more electronic trading.
John Thain, the former Goldman Sachs Group Inc. president who took over running the Big Board three weeks ago, discussed the plan in meetings with many of the exchange's 1,366 members. Traders interviewed afterward said the plan would expand an existing computerized trading platform, known as Direct+, to automatically match up large orders.
The move is significant because the NYSE is the last major exchange using "specialists," traders who have exclusive rights to oversee the auctions of given stocks. Under the "open outcry" auction-style system, most orders go through the specialists, who oversee the bids and offers before a price is reached.
The NYSE already offers Direct+ for smaller orders, trades of 1,099 shares or fewer. However, only about 7 percent of the orders that qualify are executed electronically. Under the proposal Thain is expected to present Thursday to the NYSE board, the electronic trading system would capture orders of all sizes and automatically execute trades when a buy and sell order have come in at the exact same price.
Under the current system, a specialist receiving an order for 10,000 shares of a stock at $22 each, for example, may conduct an auction to see if the transaction can be completed for the buyer at a cheaper price - even if it's only one cent lower.
The ultimate goal of increasing electronic trading would be to ensure that large investors, such as mutual funds and pension funds, get their orders executed faster rather than waiting for the haggling process to play itself out, traders said yesterday.
Critics of Thain's proposal said NYSE floor brokers, who act as intermediaries for buying and selling rather than the specialists themselves, would be hurt most. Thain has proposed letting orders bypass floor brokers where the trades will be automatically executed at the best size and price available at any time.
Greg Gavin Jr., an independent floor broker, said, "A significant portion of our customer base wants speed. We should give it to them." |
