For the first time in history, the New York Stock Exchange on Monday will do something it’s never done: Operate on a fully electronic basis, after two individuals tested positive for coronavirus.
The 228-year old Big Board temporarily shut its iconic trading floor on Friday, in a move which sent shockwaves through Wall Street, and made some of its brokers fear afraid for the future.
“This will kill the business of many floor brokers,” says Tim Anderson, Equity Market Strategist at TJM Investments.
“Many portfolio managers use price and volume information they get directly from the trading floor to help ‘right size’ buy and sell orders,” he added.
The NYSE’s floor was thoroughly cleaned earlier this month, and visiting hours were cut short to avoid extra people on the floor.
This past Monday, medical personnel were placed at the exchange’s entrance, to take everyone’s temperature. However, that same day, two individuals with fevers were turned away and given a coronavirus test, which later came back positive.
‘Squeezed to the bone’
Over the years, electronic trading and algorithms have replaced traders and brokers on the floor. Currently, the stock exchange floor operates with a fraction of the members it had during the 2008 financial crisis, the end of the Dot-com bubble, or the crash of 1987 amid the rise of automated trading.
The exchange’s plan includes having everyone operate remotely, including brokers, specialists and designated market makers (DMMS). They will serve as a point of contact for companies listed on the exchange, with the ability to open and close stocks manually, as well as execute initial public offerings (IPOs) and direct listings.
John Tuttle, the NYSE’s Vice-Chairman and Chief Commercial Officer, told Yahoo Finance in an interview on Friday that the temporary shift toward automation was “absolutely not” the end of the trading floor. However, brokers submitting orders for clients may be affected the most by the temporary closure.
“Commission rates are squeezed to the bone,” Anderson told Yahoo Finance. “Brokers don’t make anywhere near the money they used to make years ago,” he added.
By going fully electronic, somer brokers fear losing access to commissionable tools like D-orders, which can be placed or cancelled almost up to the close of a trading session.
“Some of the types of clients that we service, they will not have the ability to route orders directly to floor brokers. They will have to route their orders to the NYSE trade book, “ according to Jonathan Corpina of Meridian Equity Partners.
However, he says other clients will still be able to be serviced, even off the floor.
The NYSE’s move was a surprise to some. Earlier in the week, one longtime broker told Yahoo Finance that the Big Board would “never, ever” close the floor. On the rare occasions the exchange chose that route, it was when the markets were already closed — such as during Hurricane Sandy and the days immediately following the September 11, 2001 attacks.
Corpina, however, said he had a feeling this would happen, arguing that the NYSE “has done everything they could to keep the floor open.”