NYSE Floor Suffers Defections
NYSE Floor Suffers Double Dose of Defections Amid Changes in Technology, Trading Rules
November 15, 2007: 10:55 AM EST
NEW YORK (Associated Press) - The outlook for the New York Stock Exchange's iconic trading floor darkened considerably this week, as two of the exchange's seven stock trading specialists decided to call it quits.
On Thursday, Van der Moolen Holding NV said it will close its NYSE market-making unit VDM Specialists USA after losing 11.3 million euros ($16.5 million) in the first nine months of the year. The announcement came just a day after SIG Specialists Inc., a unit of Susquehanna International Group LLP, said it would stop acting as a stock specialist.
The exits punctuate how changes in technology and trading rules have rendered all but obsolete the NYSE's specialists, who for more than two centuries ensured that buyers or sellers of NYSE-listed stocks could readily be found.
Each specialist firm is responsible for trading in hundreds of individual stocks. They match buyers and sellers and step in with their own capital when counterparties can't be rounded up.
The departures follow multiple rounds of layoffs that have cost hundreds of jobs, and will leave the NYSE with just five specialists. They include units of Bank of America Corp., Goldman Sachs Group Inc. and Bear Stearns Cos., as well as LaBranche & Co. and Kellogg Specialist Group. The NYSE is a unit of NYSE Euronext.
The NYSE released a statement Thursday saying it will work with Van der Moolen to "ensure an orderly reassignment" of the specialist firm's roughly 400 NYSE-listed issues. Those stocks, representing about 13 percent of listed U.S. Big Board issues, include a variety of blue-chip companies including Eli Lilly & Co. and Walt Disney Co.
In recent months, NYSE has held discussions with a variety of trading firms about becoming specialists. Units of brokerage and trading firms such as UBS AG, Citigroup Inc., Citadel Investments, Lehman Brothers Holdings and Getco Holding Co. have electronic trading capabilities that might work to replace Van der Moolen.
Firms, though, have resisted becoming specialists because of the heightened regulatory scrutiny that job entails and because of the declining market share for specialists trading NYSE stocks. NYSE under co-Chief Operating Officer Duncan Niederauer has been loosening some of those trading restrictions in an effort to make specialist trading more attractive.
Activity on the NYSE's trading floor has fallen sharply due to the rise electronic trading, which offers faster transactions and the anonymity heavy traders such as hedge funds crave, and growing competition for market share.
U.S. stock exchanges don't enjoy a monopoly on trading in their own listed stocks, opening the door to competing exchanges, alternative trading systems and brokers to take away business. The NYSE, for example, only put buyers and sellers together in 54 percent of the transactions in its listed stocks in October, down from 69 percent a year earlier.
Echoing that trend, SIG said Wednesday is giving up its NYSE role to concentrate on its own trade-matching activities.
"Susquehanna International Group of Companies has made the determination to concentrate its equity trading resources on its own institutional and electronic liquidity provision platforms," SIG Specialists President Todd Abrahall said.
The NYSE said Wednesday the 147 stocks allocated to SIG will be reassigned to Kellogg. The stocks account for about 2 percent of NYSE listed volume. SIG Index Specialists LLC will remain a specialist for exchange-traded funds listed on NYSE Arca.
Niederauer, who is the incoming NYSE Euronext chief executive, said in an interview Wednesday with Fox Business News that he expected more moves like SIG's.
Amsterdam-based Van Der Moolen said overnight that it will close its specialist operation "as promptly as possible" after failing to restore profitability.
"Losses in the U.S. operation of Van der Moolen Specialists continued this quarter," the company said. "We therefore decided to terminate the specialist activities of VDMS." |
