NYSE traders: Tuesday rout shut automation briefly
Wed Feb 28, 2007 12:42pm ET
NEW YORK, Feb 28 (Reuters) - The New York Stock Exchange briefly shut down automated trading during the final minutes of Tuesday's market rout, two traders said on Wednesday, raising questions about the Big Board's new hybrid system.
The NYSE Group Inc. (NYX.N: Quote, Profile , Research) acknowledged late on Tuesday that it experienced "intermittent delays," but has not yet provided additional detail.
But the traders said computerized trading was switched off briefly before before being turned back on and one suggested the NYSE's chief executive was personally involved in trying to manage the situation.
"John Thain made a decision at about 3:56 that orders weren't being received into the books and everyone should close the day with manual trading," said Terry Dolan, a NYSE floor trader. "But a few minutes later he switched the electronic system back on, putting orders in queue throughout the system and leading to a backlog into late evening hours."
The NYSE did not respond to requests for additional comment on Wednesday.
The Big Board's struggles with Tuesday's heavy volume has raised questions about its push to add automated trading capabilities to its storied trading floor, where hundreds of specialist trading positions have recently been eliminated.
The NYSE trading glitches, which happened just days before a regulatory deadline requiring electronic trading be fully operational at the NYSE and other automated market centers, came amid turnover of about 2.41 billion shares -- well above last year's estimated daily average of 1.84 billion.
"People found there was no electronic order routing at the exchange about 10 minutes before the market closed," said Jamie Selway of New York-based White Cap Trading, who added that his last order on Tuesday was executed manually about 30 minutes after the market closed.
"I think the entire exchange closed manually with an aggregation of orders done the old fashioned way," he said.
NYSE Group shares were down 65 cents, at $83.80, in early afternoon on Wednesday.
THE HYBRID DEBATE
The problem may have originated with the Big Board's Designated Order Turnaround (DOT) system, the electronic gateway that routes certain orders through the exchange.
"From my vantage point is was a failed piece of technology," said Dolan from the exchange floor. "It would not have been physically possible to do all those orders manually but with the right combination of technology and specialist traders things would have been smoother."
Headcount on the exchange floor has dwindled in recent months with the unveiling of hybrid trading, although delays in the system caused the NYSE last month to request an extension in upcoming regulatory deadlines requiring enhanced automated trading capabilities.
"Some will argue that with more floor traders this could have been averted," said White Cap's Selway. "I would go the other way and say with better technology it would have been alleviated. But that's precisely the debate that will arise from yesterday."
Selway added he saw some latency on NYSE's rival the Nasdaq Stock Market (NDAQ.O: Quote, Profile , Research), the largest U.S. electronic stock exchange, but nothing comparable to the Big Board's delays. A Nasdaq spokeswoman said the trading platform performed well and that that all trades on Tuesday had been executed by market close.
"Nasdaq is very efficient and transparent," said Selway. "On a day like Tuesday I think it really shines." |
