Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

Traders Poll

Are you in favor of a pilot program and examination of the rebate system by the SEC?




Free Site Registration

February 1, 2005

Big Board Brokers Pack for the Hybrid

By Peter Chapman

Also in this article

  • Big Board Brokers Pack for the Hybrid

The New York Stock Exchange, anxiously awaiting approval for a hybrid market, is already making big changes in floor brokers' handheld devices. As part of a wide-ranging makeover of its technology platform, the Big Board is transforming its e-Broker handheld order management device into a full-blown trading front-end. The idea is to enable the floor broker to trade stocks in an electronic environment with the same capability as an upstairs trader.

Until recently, brokers used the wireless handheld to capture incoming orders and send out trade reports and messages. In future, they will also be able to view market data and trade against the specialist's book as Nasdaq dealers trade against an ECN.

"This is a triumph of human factor engineering," says Roger Burkhardt, the exchange's chief technology officer. "We are providing our floor traders the same functionality on a small device that the upstairs trader gets on several screens."

The Big Board's hybrid market proposal, now under review at the Securities and Exchange Commission, is expected to lead to an increase in automatic executions over the exchange's Direct+ facility. If the initiative is approved, floor brokers will likely need to be able to trade in both the electronic world as well as the face-to-face environment of the crowd.

Although approval is still pending, a flurry of preparatory technology initiatives are underway at the exchange. Changes in the handheld are happening alongside those of the broker booth system, the specialist's display book and the wireless network. The work on the handheld will transform what is essentially a stripped-down order management system into a miniature front-end trading system. The Big Board is building trading functionality into the e-Broker typically found only on upstairs desks.

The first e-Broker was introduced ten years ago as a tool that would make more efficient communications between the floor broker and his upstairs customers. But the gadget was heavy, awkward to use and had a short battery life. Most brokers stuck with their pads and pencils. Ten years and five models later, though, about 600 of the 800 brokers on the floor have discarded their multi-page pads for e-Brokers. The other 200 brokers are using handhelds built by their firms or by vendors. Some independent brokers use two devices: e-Broker and one built by connectivity vendor NYFIX.

Behind the big run-up in adoption is decimalization. The switch to penny ticks has slashed the average trade size, forcing brokers to cope with significantly more trade reports. The handheld has become something they can't live without.

The current e-Broker was custom built for the exchange by IBM. At approximately five inches wide, eight inches long and two inches thick, the device falls somewhere between a PDA and a tablet. The screen is a little over six-inches measured diagonally.

Branded Pinehurst' by IBM, the gadget weighs 1.8 pounds, has a curved back designed for a trader's hand and requires only one battery change per day. The NYSE ordered 3,000 -1,500 for the 30 Broad site and 1,500 for the Big Board's back-up facility. E-Broker is distributed free to any broker who wants it.