NYSE trading floor empties out as trading moves to electronic exchanges - LAT, 2010 May 15, by Nathaniel Popper
There was shouting and jostling. A few traders found themselves picking up the clunky black phones that had been relegated years before to serving as historical set pieces. The cause of all the excitement was the mysterious "flash crash" that sent the Dow Jones industrial average plunging 700 points in a matter of minutes, prompting the Big Board to stop its computers from automatically executing trades and forcing human traders to step into the breach. "People were running around like it was old days," Alan Valdes, the dapper director of floor activities for Kabrick Trading, said wistfully this week as fellow traders, with the panic behind them, stood nearby, reading the newspaper and gossiping. The irony of last week's frantic activity is that the frightening dive only highlighted the NYSE's loss of stock market dominance — a loss that has helped turn the Big Board's venerable trading floor, once the nerve center of American capitalism, into something often more akin to a TV news studio. Debates continue about what triggered the sell-off, but regulators suspect, in part, new trading venues that match sellers and buyers at warp speed, and without the human intervention that the Big Board values. The NYSE and Nasdaq — its longtime, all-electronic rival — are increasingly threatened by these upstart exchanges. Last year, the Big Board was responsible for only a third of all trades in the U.S., down from more than three-quarters four years ago. Nasdaq saw a similar decline in market share. At the same time, a growing portion of the transactions handled by the Big Board are processed entirely by electronic means. As a result, the NYSE trading floor has been emptying out. About 1,500 people work on the floor today, down from 3,000 a decade ago. The brokers on the floor are left entering trades into their electronic handsets and monitoring the progress while they occasionally wander around the trading floor. As traders have moved out, the media have moved in. More than 20 news organizations, including CNN, Bloomberg and even the BBC, use the floor as a backdrop to talk about a stock market that has no real location. Fox Business News operates from a vacant broker's booth. The last two additions to the floor: AOL's online news operation and local cable channel NY1, which took up residence in April in a post originally set up for a Big Board "market maker," or someone who matches buyers and sellers. ..... On the other hand, some experts say the NYSE's intentional slowdown during the crash may have exacerbated the collapse and restrained the rebound. ..... The Big Board hasn't been standing still. In a defensive move, it acquired the all-electronic Arca exchange in 2006. And on the NYSE itself, an all-electronic trade now takes only 3 milliseconds — three-thousandths of a second — to complete a trade on Arca. That's down from 300 milliseconds three years ago, but still not enough to keep up with the even newer exchanges that cater to so-called high-frequency traders. The NYSE also is setting up high-speed data centers in New Jersey and near London to accommodate the high-frequency practitioners, who want to be as close as possible to the trade-executing computer. Such electronic efforts could pay off for the Big Board — and many on the floor still believe that there will always be a place for some live humans. But Brenner, the trader turned finance professor, said he couldn't imagine the live floor lasting much longer. "It's almost like fighting the Industrial Revolution," he said. "This is progress. You cannot stop it." ..... For 15 minutes last week, the New York Stock Exchange was bustling like it was 1999.
It was a final test, and Fargis was relieved. The 30-year-old never went to business school or even took a finance class. But he knew poker. He had made a living playing the game online for six years from his Manhattan apartment, betting on up to eight hands at a time. Within a few days, Fargis — with no Wall Street experience — was offered a position trading stock options, a job that entails making multimillion-dollar gambles. His poker skills sealed the deal. "If someone's been successful at poker then there's a good chance they could be successful in this business," said Toro partner Danon Robinson. "If you have no interest, that's almost a red flag.... It's almost the equivalent of not reading the Wall Street Journal." There's a part of Wall Street — investment banking in particular — that looks for recruits with sterling family connections and impeccable educations, and that favors sturdy young men and women who played college team sports such as lacrosse and rugby. Toro Trading is not that Wall Street. Instead, it's one of the new breed of high-speed trading desks that are revolutionizing the financial markets, and making their money on the fractional gains from buying or selling a split-second ahead of their rivals. They look for job candidates who are quick-thinking, have nerves of steel and a head for numbers — the very skills that lead to success in online poker. "There's a certain maturity and ability to deal with risk that is hard to get any other way — unless you put the money on the table at some point in your life," said Aaron Brown, a hedge fund executive and author of the 2006 book "The Poker Face of Wall Street." Susquehanna International Group, a 1,500-employee trading firm based in a Philadelphia suburb, has made the card game a central part of its training program. New hires are given copies of "The Theory of Poker" and "Hold 'Em Poker" and spend one full day a week studying the game by playing it. "We are trying to teach people how to be good decision-makers under uncertainty," said Pat McCauley, who runs the training program. "It's not the stereotypical stuff with bluffing — it's real science." ..... Chris Fargis thought his big job interview was over. But when the partners at Wall Street upstart Toro Trading finished with their questions, they broke out a deck of cards and a green-felt card table. Mind playing a few hands of poker?