After standing for the past 200 years, floor brokers at the New York Stock Exchange are finally being offered a seat. Over the next 18 months, the division of NYSE Euronext plans to demolish all of the standard booths in its Main Room where NYSE-listed securities are traded and build large sit-down trading areas for their inhabitants. Once that project is completed, the New York plans to renovate the Garage, the other room used to trade NYSE-listed securities.
The goal is to bring volume back to the floor or, at least
keep it from leaving the floor by encouraging floor brokers to expand their operations on the floor or bring their upstairs desks down to the floor. In the past few years, several of the independent brokerages have built, or made plans to build, upstairs desks. As they move upstairs, they do more of their trading away from the floor.
"We are going to create a refreshed look for the floor trading community and create traditional trading desks," Bob Airo, a senior vice president for NYSE market operations, told Traders Magazine. "A floor-based firm could bring its whole upstairs trading desk down to the NYSE floor."
MND Partners, Mogavero Lee &Co., Meridian Equity Partners and Cuttone & Co. are four of the five firms that have agreed to move into the new trading pods. All four are independent floor brokers. Meridian and Cuttone operate upstairs trading desks, as well
Generate Efficiencies
MND Partners, in the midst of a hiring spree, recently looked for space at 14 Wall. It opted to go with the New York’s plan instead. "We have looked at real estate recently, but this is the best alternative," said Neil Catania, MND Partners’ chief executive. "Being at the point of sale really works for us." Due to increased demands for speed from customers and the related data-latency issues, Catania believes being together in one space is most effective.
Behind the NYSE’s move is the realization that most activity on the floor takes place at the opening and the close. Between those time periods, most trading is done upstairs. By enticing upstairs desks down to the floor, the exchange believes it will garner more flow during the slow period. The pitch to the mostly independent firms is that they will save on real estate costs and generate efficiencies by having all their personnel in one place.
That firms like Meridian and Cuttone have opted to move their upstairs desks down to the floor and that MND Partners has chosen to not build upstairs is good news for the exchange. Until Regulation NMS and the New York’s move to a hybrid electronic-floor model, the exchange had about 80 percent of the volume in the trading of its shares. Now its market share is more like 25 percent. Anything that brings–or keeps–volume on the floor is welcome. "A sales trader on the floor might be less likely to throw an order into an upstairs algorithm," Airo said. "He would work it on the floor."
Keeping the floor alive is not just about traded volume. The images of hustle and bustle seen daily in the media are central to the exchange’s brand identity. The television crews stationed around the floor keep the NYSE image alive and burned into the world’s collective mind. In addition, the exchange’s bell-ringing ceremonies are important publicity events for all involved. No floor, no bell-ringing.
The New York says it has firm commitments from five firms for the first phase of the project, including one bulge bracket firm. It is in talks with six others. The rebuild is expected to appeal mostly to small and growing floor brokers. They may be trying to balance a floor presence and an upstairs operation. Or they may be floor brokers without an upstairs desk but considering one.
Mogavero Lee & Co., for one, believes it will be able to wring efficiencies out of the new pod scheme. "We need a new space to accommodate a new way of trading," said Doreen Mogavero, the firm’s chief executive. "We need the efficiency of the sort provided by an upstairs trading desk."
Like most floor brokers, Mogavero and her five traders stand six and a half hours per day. The new configuration would allow them to sit in front of computer terminals, just as upstairs traders do. Communication among staff would improve, Mogavero noted, and the firm would be able to better manage its technology.
The exchange would not divulge the cost of the project, although it says it is partnering with the brokers to pay for it. Sources say the exchange is picking up most of the tab.
The project will involve tearing down several very old booths, which provide space for about 400 traders and support personnel. The exchange plans to renovate the Main Room (15,000 square feet) starting this fall. After that project is completed, it will renovate the Garage (7,500 square feet). The Garage will not get pods, but single spaces.
Difficult Environment
Currently, in the Main Room, broker booths ring the perimeter while specialist posts fill in the center. Booths include both "superbooths" operated by large full-service firms such as Goldman Sachs and JPMorgan and many more standard booths housing the employees of smaller shops.
The superbooths, built in the 1990s, are spacious and comfortable, but the standard booths are old, cramped and unattractive. A dozen traders and their assistants may stand in the narrow and dimly lit four-foot-wide corridor. "It’s a really difficult environment to work in," said Lou Pastina, NYSE Euronext’s executive vice president in charge of NYSE operations. "And it’s not really attractive for an upstairs firm to bring down their traders." Built in the 1800s, the standard booths are "decrepit," NYSE senior executive Larry Leibowitz told an industry crowd this year.
For the project, the exchange has divided the Main Room into four quadrants. It plans to begin construction on the quadrant bordering New Street, working during weekends so as to not disrupt trading. The exchange also plans to upgrade its network, add new wallboards, outfit a booth for CBS and build a food court, thus saving traders a walk down two flights of stairs.
When construction is completed in 2011, the Main Room will house about 15 trading pods, or trading areas. They are expected to resemble smaller versions of typical upstairs desks. To compensate for space limitations, the actual desks will be smaller than those found upstairs and the 24-inch monitors may be turned vertically, the exchange says. Plexiglass dividers will provide traders with some privacy.
The pods will seat anywhere from 10 to 40 traders. And while they will take up more space than the existing booths, the exchange says no one will be forced off the floor. Smaller shops such as the sole proprietorships will move to the Garage.
In conjunction with the booth renovation project, the exchange also plans to open up the Main Room by removing pieces of its gigantic specialist posts and incorporate an indirect lighting scheme. The project should lessen the claustrophobic feel of the Main Room, making it seem airier and brighter, more like the exchange operator’s new NYSE Amex options trading floor.
Not every floor brokerage is enamored of the plan. The New York pitched the idea to Rosenblatt Securities but was turned down. With seven traders on the floor, Rosenblatt operates the largest NYSE-listed trading operation at the exchange. The firm has had an upstairs desk for 20 years
Dick Rosenblatt, chief executive of Rosenblatt Securities and an NYSE executive floor governor, said he’s not planning to move his upstairs operation down to the floor, but sees the benefit for some firms. "I think it’s most appealing for a firm that is trying to launch or expand an upstairs business," he said. "In growing anything, you are absorbing a lot of costs. Here the exchange is offering to help you defray that expense."
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