Are floor traders at the New York Stock Exchange about to be reborn in a new guise, after being written off as a dying breed? "There are actually signs of hope," FierceFinance observes.
Last week, Lehman Brothers announced agreement to acquire Van der Moolen Holdings, one of seven remaining specialist firms. While noting that some see the transaction as a "giveaway," the FierceFinance newsletter emphasizes Monday that "Lehman apparently wants to operate on the floor."
After NYSE embraced electronic trade handling through its purchase of Arca in 2005, a trend toward fewer trades being routed through "specialist" firms on the exchange floor accelerated. The NYSE has shrunk to two trading floors from five, leaving just 200 specialist personnel working on the floor, about half the number that were there in 2005, according to a recent MarketWatch column.
But in a bit of an about-face, Duncan Niederauer, the new chief executive of NYSE Euronext, is now embracing a Nasdaq-like model in order to justify the trading floor's continued existence. Niederauer is urging floor specialists to become "designated market makers," and is seeking SEC approval to let them fill customers' buy and sell orders by risking their own capital the way Nasdaq's market makers do.
"With fewer trading restrictions and new blood like Lehman, the hope is that a new and more profitable breed of trader will emerge on the floor, armed with algorithms," MarketWatch reports. "Some officials even hope that more old-line firms, like those owned by Bank of America Corp. will abandon the floor, allowing in new traders.
"The last publicly owned specialist, LaBranche & Co., is trying to transform its traders into this new breed. Some expect LaBranche to be taken private in its do-or-die effort."