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Capital Markets

Exchange trading: Are floor traders drowning not waving?

NYSE will keep the floor alive having introduced electronic trading; critics say floor traders will soon be swamped.

After sailing against the winds of change while other exchanges were busy adopting electronic trading, the New York Stock Exchange has opened the door to the digital age. Last month, the exchange implemented the third stage of its hybrid system, which combines electronic and floor trading.

As most of the liquid stocks are now being traded electronically, analysts say this might be the beginning of the end for NYSE’s iconic trading floor. Of course, these predictions are not new.

“Most of us have been predicting the demise of floor trading,” says Sang Lee, managing partner at Aite Group, a research and advisory firm. “I personally have done so for years. When it happens, it will be anticlimactic.”

Comments like these will not go down well with traders on the floor. Much of the resistance towards electronic trading has been attributed to their influence. But pressure to comply with Reg NMS, which requires best pricing and fast quotation, and the increasing pressure from other bourses and trading platforms, made change inevitable. In addition, their influence is diminished since the exchange became a public company. Shareholders will be keen to turn around the declining market share.

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