On a day of trading clouded by fears of a potential terrorist attack, John Thain, the chief executive of the New York Stock Exchange, announced on Monday his long awaited plan to increase electronic trading that could diminish the historic role of floor traders.
His proposal, which will allow institutional investors to trade large blocks of stock electronically, is a radical shift for the exchange and its 1,366 members.
PHOTO: AFP
It is all the more ambitious for being introduced during a time of nervousness in the markets spurred by the onset of rising interest rates, terrorist threats and political uncertainty.
After the weekend news that the exchange and other financial institutions were possible targets of terrorist attacks, New York's leading politicians were at the exchange on Monday morning, from Senator Charles Schumer, a Democrat, who greeted traders as they entered the building in the morning, to Governor George Pataki and Mayor Michael Bloomberg who rang the opening bell.
"We are open for business," Thain said Monday as he stood before the statue of George Washington on the steps of monument hall, with Schumer beside him.
Missing from Thain's clipped, to-the-point remarks was the patriotic oratory that his predeces-sor, Richard Grasso, favored, especially in the aftermath of the Sept. 11 terror attacks.
But for Thain, a former president of Goldman Sachs who directed the firm's aggressive investments in electronic trading, his expertise lies less in promoting the exchange and more in mastering the technological details of his new plan and persuading the Big Board's many constituencies to adopt it.
Defenders of the New York Stock Exchange's two-centuries-old open outcry system, which relies on specialist traders to use their trading acumen and capital to help investors find the best price for a stock, say that now, more than ever, the experience and know-how of the floor trader is needed to ensure price stability.
At a news conference on Monday, however, Thain said the new program, which is called Direct Plus, was designed so that large institutional investors such as Fidelity and American Century would conduct more of their electronic trades with the New York Stock Exchange.
"If we didn't respond to our customer base," Thain said. "They would pull their volume off and trade on the electronic markets."
The stock exchange's market share is currently 80 percent, having dipped to a low of 75 percent in January during the controversy over Grasso's pay.
Institutional investors have long complained that they cannot trade with speed and anonymity at the exchange and, as a result, they have channeled much of their trading to the Big Board's electronic competitors.
A draft of the Direct Plus proposal was sent to the Securities and Exchange Commission, the exchange's main regulator, on Monday for approval.
Thain said he expected the new version of Direct Plus to become operational within six to 12 months.
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