NEW YORK: The Wall Street trading professionals who facilitate the trading on the floor of the New York Stock Exchange (NYSE) recently have been thrust into a potential fight for their livelihoods and have therefore begun reaching out to the media and regulators in an effort to defend themselves.
These professionals, known as specialists, are under attack for representing what their critics say is an antiquated way of doing business in the internet age. The NYSE employs a so-called "open outcry" system of trading, in which the specialists act as referees between buyers and sellers, who actually meet in person on the floor of the exchange. The method is under attack by the exchange's electronic competitors, such as Archipelago, Instinet, and the Nasdaq, which allow for trades to happen via computer networks and require no in-person human interaction.
Last fall, David Humphreville, president of The Specialist Association, a trade group, met with reporters for off-the-record conversations to explain and defend the Big Board's system and the specialists' role in it. He said he met with journalists at major publications, such as The Wall Street Journal, The New York Times, the New York Daily News, and The Financial Times, taking with him at least two specialists and a floor broker.
"We talked to them about what happens on the floor of the exchange," he said. "It was mainly an open-ended conversation about how the exchange works."
Humphreville said the media tour was not necessarily to get specific stories but to help reporters do more informed journalism. "We wanted to get to know the reporters who cover us and to talk about our issues," he said. "I think it helps make the coverage more balanced. There is a lack of understanding of how the floor actually works."
Toward that end, on February 18, the NYSE held its first "Traders Night" for journalists, inviting 100 or so to come to the exchange floor at night and have specialists and traders explain how it works. The NYSE has done this in the past for Wall Street professionals. It was The Specialist Association's idea to invite journalists.
Humphreville said he continues to talk to reporters, regulators, and the Big Board's customers. Other groups defending the system are the Alliance for Floor Brokers and the Organization of Independent Floor Brokers.
At the heart of the debate is which is more important in trading: speed or the best price. The so-called trade-through rule requires all trades to be made at the best price offered at the time. The SEC last week proposed relaxing the trade-through rule, a move that could allow investors to avoid the specialists and steer more trades from the NYSE and to the electronic exchanges.