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Sold Short

The computerization of the Big Board is quickly turning the trading floor into a ghost town.


It’s been a record year for Wall Street, but on the New York Stock Exchange’s iconic trading floor, things are slowing down. Traders still dash about in their color-coded smocks placing orders to specialists, whose fingers fly across their keyboards as they match buyers with sellers. The zipper still zips over their heads. But with the advent of computerized trading, they’re not long for this place. “They’re laying off people left and right, and the computers are taking over,” said John, a twenty-year veteran broker who asked that his last name not be used. “See those keystrokes?” says Daniel Tandy, a senior managing director with Prime Executions, pointing to a guy typing hastily under a dangerous-looking contraption of computer screens. “They’re going to do away with all of those.” The new system will trade like a thermostat, more or less, with computers programmed in such a way that if the price of the stock reaches a certain value, they will trade automatically, and at a much faster pace (in less than a second—now it typically takes nine). Investors will also now be able to sell huge bundles of stock electronically, up to a million shares at a time (the current limit is 1,099). It’s called a “hybrid” market.

The gradual rollout means that only 179 of the exchange’s 3,600 stocks are currently being traded electronically, but the entire exchange is scheduled to go online in December. “The mantra right now on Wall Street is cheaper, faster, smarter,” says Michael Scotti, editorial director at Traders magazine. “The exchange will be there—stocks have to trade in a regulated environment—but to what degree the floor will be there, everyone has varying opinions.” Two weeks ago, the Big Board announced it was closing one of its five trading floors downtown. “We may still have a good future here; I’m not sure if the new system will allow us to be as good as we are today,” says Tandy. “We react to order flow now; in the new world, you have to know what you want to do beforehand and hope that you’re right.” In any case, it’s happening. “There’s going to be a social-psychological change on the floor,” says Lou Pastina, senior vice-president of market development at the exchange. “It’s a bunch of very resilient people. They reinvent themselves and they find a way to take technology, make it work for them, and continue to add value. There’s a fraternal nature to the trading floor, and I think it’ll continue. But this is business.”

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