The New York Stock Exchange floor was rocking. It was a party. Besides the live music blaring, trading types were enjoying–as you might expect–food, drink and conversation. The host was BIDS Trading, and things are beginning to heat up for the dark pool. BIDS is the crossing network owned by roughly a dozen big brokers. Last month it broke two previous records for trading volume. The cause for celebration on the NYSE floor was the launch of BIDS Trader, its new buyside interface.
BIDS CEO Tim Mahoney told our John D’Antona that his company was positioned for growth, maintaining that it was still early in the development of the crossing network business. Things are looking up for BIDS, as it looks to close ranks with longtime systems like ITG Posit and Liquidnet. One area that BIDS will hope to address with its new interface is its trade size, which it will need to grow to become a true block venue. Right now BIDS is averaging just under 400 shares per trade, according to Rosenblatt Securities. The industry will be watching that number.
As the band played Bruce Springsteen cover tunes, I had two conversations that represent the past and the future of trading. One was with a salesman at one of the big algo shops: the future. The other conversation was with a floor broker I’ve known for a number of years: the past. With the downturn in institutional volume, the floor broker’s firm is feeling the pinch, despite having an upstairs desk. No research, he said.
To combat not having research, some execution shops have launched corporate access businesses. These brokers deliver company management to money managers and the managers reward the brokers with commissions. You can read more on this in James Ramage’s feature.
Speaking of the future, Peter Chapman’s cover story maps out where the exchange business is going. It’s all about data centers and co-location and speed–that’s right, high-frequency trading. Here’s a quote that explains why my floor broker friend does not see a bright future: "Our data centers are the trading floors of the future. The network electronically replicates the physical floor where people used to walk and talk." Those comments come from Stanley Young, chief exec at NYSE Technologies.
You can read in this issue how NYSE Technologies was developed. In short, it plans to provide outsourcing to brokerages. For any new business, the only certainty is that there will be challenges ahead. Enjoy the issue.
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