NYSE's latest system may add volume, lower fees
NEW YORK, Oct 6 (Reuters) - The New York Stock Exchange rolled out a system on Friday that combines an expanded electronic platform with the top U.S. stock exchange's traditional floor-based "specialist" traders.
Implementation of the latest phase of the NYSE Group's (NYX.N: Quote, Profile, Research) Hybrid Market plan began by raising prior ceilings on electronic trading in two stocks, American Express (AXP.N: Quote, Profile, Research) and Equity Office Property Trust (EOP.N: Quote, Profile, Research).
Commenting from the exchange floor, a broker who asked to not be identified said the system had been working smoothly throughout the day.
Hybrid trading for hundreds of others will follow in coming weeks, until all NYSE-listed securities are handled by the system in early December, before regulations requiring access to electronic trading take effect.
With implementation stretched through year's end, any immediate changes may muted, but could lead to both increasing volume and competitive pricing pressure for the NYSE.
"It's not going to be a 'Big Bang'," said NYSE Senior Vice President Lou Pastina, referring to the 1986 expansion of electronic trading on the London Stock Exchange (LSE.L: Quote, Profile, Research) which preceded an exodus of floor traders.
"We need a little time for all of this to play out and then for firms to determine their resource level," Pastina added.
Analysts expect many specialists to ultimately lose their jobs under the new regime.
Piper Jaffray senior analyst Joshua Elving says in the near term the role of specialists could be maintained, "but over time the NYSE is essentially going to wind down the floor operations."
The exchange's Pastina argued that with their share of execution at a "historic low," specialists could maintain or increase the volume of trades they handle.
"Allowing computers to do the most mundane aspects of the specialists job will free them up," said Pastina, giving "time to focus on fundamentals and customer service."
Customer service from specialists, in addition to factors like reliability, is partially why the NYSE charges a premium for listing on the exchange, Pastina said.
But the new regulations requiring access to electronic trading have "opened up NYSE's listings to trade anywhere," said Jaffray's Elving, causing competitive pressure on pricing.
Rival exchange Nasdaq (NDAQ.O: Quote, Profile, Research) has increased its share of volume in NYSE-listed securities and reports it now trades over a quarter of the securities.
"Historically the NYSE had a bit of a monopoly on their listings," said Elving. "There is nothing that they can do now to keep volume at home besides lower prices." |
