I work on Wall Street; please don't hold that against me

By: Ray Pellecchia

File Under: NYSE

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A couple of weeks ago, I posted about a USA Today article that discussed the impact of the Hybrid Market and Reg. NMS on the NYSE trading floor. Among other things, I wrote:

In recent months, the man/machine story of the trading floor increasingly has been reported in non-financial media, beyond the Wall Street Journal, New York Times, wires and trade media. USA Today joins a list that includes CNN and Washington Post -- broader-interest media, if you will. I welcome this. Not every day you get an opportunity to state your case to the world, to try to demonstrate how you add value to the world far beyond lower Manhattan.

What a dope.

That's how I felt after reading comments by USA Today readers about the article (most of the comments, anyway). One of the neat things USAToday.com does is allow readers to post online comments at the conclusion of each article. This article to date has drawn nine comments, which I've pasted below along with my own comments, which I might post myself on USAToday.com.

asuperstar wrote:
How many more jobs will be lost because of computers?

What a disgrace the people with money are that they just let people go because they can!

This will end up bad. America simply can not go on cutting everyones jobs because they can!

Don't get it do you guys?

Here I can see our message is ... um ... not exactly getting through. As I wrote earlier: "The story is not unique to this trading floor, this company or this industry. The story is not man vs. machine, it's man AND machine -- how can we use technology to transform our business for the better, to create greater value for customers? What is the right combination of the two, the right balance?"

Separately: "What a disgrace the people with money are..."? I see this issue as part of the evolution of markets, not class warfare.

James38745 wrote:
I'm surprised they lasted this long. I welcome the axe coming down on them as I'm sure their profession made way more money over the years than it should have. Progress like this continues to show why capitalism works.

You're sure their profession made more money than they should have? Exactly how are you sure of that? They make what they earn, a return on the value they add: exactly what the market bears. Should something other than the market decide how much they make?

"I welcome the axe coming down on them..." A little harsh, no?

nika wrote:
It's hard for me to feel very sorry for these traders. Many of these folks drove up stock prices and fattened their wallets when other industries slashed jobs through technology or outsourcing. It it hard for them to cry foul after much of the manufacturing sector in this country was decimated and they directly profited.

I won't shed a tear.

Now we're really getting into stereotyping. "Many of these folks drove up stock prices..." What makes you think that, Nika? If any folks on our trading floor did that, they'd be barred. "...[W]hile other industries slashed jobs..." -- are you aware of how much the trading business has downsized in recent years?

I also don't understand how anyone on our trading floor would "directly profit" from cutbacks in the manufacturing sector, unless they happened to own rising shares of manufacturing stocks, but the same could be said for anyone who holds those stocks.

truckman wrote:
Technology is for replacing people. Cars would be much cheaper (union made ones at least) if robots did more.
With my pc I don't need to buy stamps to mail bills, pay them online, check the bank info online, reserve books at the library online, etc.
London did this years ago.

More often than not, technology helps people, it doesn't replace them. My computer helps me communicate and enables me to blog; it's a tool for me, not my eventual replacement. (I hope!) Technology replaces people when tasks become commoditized and can be done better and more efficiently by machines. I, too, reserve library books online, but I know from experience my librarian can answer certain questions and make recommendations better than a system can. Our Hybrid Market is designed to give people the technological tools they need to continue providing the value that only people can bring -- judgment; discretion; risk-taking; communication -- in an environment that also offers completely automated trading for those who choose it.

KRI wrote:
I kind of hate to hear this. I know time marches on and all, but my husband and I got to go on the floor about ten years ago with one of these people and "try" to keep up. Wow, it was amazing. It seemed like complete craziness, but they were in total control. It was something neither one of us ever forgot.

That makes my day, KRI. If NYSE can get the right balance of auction and automated trading, people on the trading floor will continue to participate in and add value to the market, and the experience you had will be a part of the future, not just the past.

mistamilla wrote:
Well, speaking of technology, I haven't set foot in a bank in over 2 years. Why? Well, online bill pay and direct deposit. If I want any cash, dozens of ATMs are conveniently dotted all over town. It won't be long, I think, that "bank tellers" will be a job like buggy-whip makers....a thing of the past.

ATMs have been around for decades now, but tellers remain. Why? Two thoughts:
1) They must provide a service that at least some customers value enough for banks to make them part of their value proposition;
2) Some customers appreciate having the choice of ATM or teller. By the same token, NYSE customers appreciate having the choice of doing business with a human being -- particularly for large, complex transactions -- in addition to be able to take a completely automated path.

fx772k1 wrote:
With everyone looking to cut costs, a fully-automated NYSE is inevitable.

The facts don't support this. An authoritative, independent firm that measures trading costs for large, institutional investors finds that NYSE is consistently the *lowest-cost* trading venue in the world. Why? Part of it is that we centralize the largest number of buyers and sellers; but another important reason is that our model enables people to negotiate to get a better price for buyers and sellers.

Lower than all other markets, most of which are completely automated. Since we have the lowest cost now, when we're only mostly automated, what makes you think it would be cheaper if we went all electronic?

Rick in Georgia wrote:
Some of these Wall Street boys are making entirely too much money off of our investments. Its about time that we get to cut out some of the middlemen!

"Middlemen" implies no value added, and that's not the case here. First, on more than 90 percent of the trades here, orders meet directly without a specialist interacting with the orders; when specialists do trade, they add value by buying and selling against the trend of the market to stabilize price movements and keep trading continuous. That's part of the reason why when stocks move to NYSE from Nasdaq, their price volatility falls in half.

Much the same applies to floor brokers, who act as agents to get customers best price, not as middlemen just "taking a turn."

"Wall Street boys...making entirely too much money off of our investments"? Again with the stereotypes.

WallyRedSox wrote:
Wow, the end of an era...brings to mind the end of the movie Trading Places.

I honestly don't think it's the end of an era, Wally. But things have certainly changed, and I think we're at the low end of a cycle that will later rebound into a more vibrant trading floor. BTW, didn't the end of "Trading Places" have Eddie Murphy sipping an umbrella drink on a beach, waving to Dan Aykroyd, who was sailing off with Jamie Leigh Curtis..."Looking good, Louis"..."Feeling good, Billy Ray" -- something like that?

Taking a step back from the specifics about NYSE, I'm a little distressed but not surprised by the anti-Wall Street sentiment running through most of these comments, and the ability of people to wish ill on others they don't even know. It's as if people think Gordon Gekko works on our trading floor, and here's their chance to get back at him.

But those perceptions and stereotypes were forged not only from the movies, but from reality. The scandals of recent years (decades, really) have taken a huge toll. Ivan Boesky is still a household name -- in these parts, at least -- and that happened 20 years ago. There have been many other problems in our business, and even though we put these problems behind us and keep a sharp eye out for others, the long shadow lingers. Once lost, reputation takes many years of good work to restore.

I wish those who commented could meet the people here, and see the integrity and professionalism that runs throughout the place. Perhaps then they wouldn't be so anxious to see our heads roll. Marching the world into of 11 Wall St. isn't exactly realistic, but there are other ways to get the job done. The challenge and opportunity for NYSE and the rest of the business is restore trust by not only doing the right thing but also engaging our customers and audience through good communication.

Tags: New York Stock Exchange, Hybrid Market, NYSE, NYSE Euronext, NYX, trading, stock market, trading floor, specialists; floor brokers