Last month, the NYSE began piloting new software that many brokers say will help them better compete in an increasingly automated trading world. The new software enhances brokers’ ability to manage orders directly from their NYSE e-Broker® handheld devices. Specifically, it allows them to carve out pieces of a large order and work the order electronically throughout the day—a new capability that will make brokers faster, more flexible, and better able to bring greater value to their customers.
Today brokers carve or “partial out” their orders manually, but it’s slow and cumbersome and can lead to brokers missing trades. Because of this, brokers typically send large orders in their entirety to the order-display book or the point of sale. In doing so, however, they relinquish control over customer orders.
“The new software gives brokers full control, allowing them to better work the orders for their customers,” said Chris Burns, senior managing director at Bear Stearns. “It enables them to be more flexible and efficient in the crowd.”
Many brokers say this is key in today’s growing electronic environment. Last month, in response to demand for faster trading, the NYSE filed a request with the SEC to expand its NYSE Direct+® automatic-execution service. If approved, NYSE customers will have greater opportunities to execute their trades automatically, and this, many believe, will further accelerate the pace of trading.
“The NYSE is committed to doing all that’s required to become a fast market,” said NYSE Chief Technology Officer Roger Burkhardt. “The latest software upgrade to e-Broker is one of many initiatives to help the floor community adapt to faster trading.”
The NYSE e-Broker handheld devices have played a huge role in helping brokers manage rising volume and trade faster and more efficiently. Today brokers execute an average of 541 million shares via their e-Broker devices daily—more than 33 times the 16.3 million shares executed in 2000.
The new software will help brokers with the stepped-up trading. In addition to having more control over the management of large orders, brokers will be able to act more quickly on changes to customer requests. For example, the new software will allow customers to increase the size of existing orders without brokers having to cancel and replace them—a significant time saver that will boost brokers’ productivity and enhance their ability to track all activity against orders throughout the day. In addition, the new software will allow brokers to send Institutional XPress® orders from their handheld devices. Institutional XPress orders offer customers anonymity and certainty of execution without the risk of trades being broken up, whenever there’s a quote of 15,000 shares or more for at least 15 seconds. Brokers can also “partial” a piece of a customer’s order and receive an automatic execution against the prevailing quote via NYSE Direct+.
“Anything that’s going to make us faster and more efficient, bring it on,” said Gordon Charlop, president of brokerage firm W.J. Dowd and a pilot user of the new software. “This latest upgrade on the handheld provides us with another tool to better manage orders and offer our customers greater value.”
The new software—one of a series of enhancements planned for the year—is expected to be implemented on all e-Broker handheld devices by May. Other upgrades include a new custom-designed handheld, an upgraded wireless network, and the integration of real-time market data such as NYSE OpenBook® —a list of all buy and sell limit orders on NYSE limit-order books—to brokers’ handheld devices. Another significant enhancement would give brokers the ability to quote electronically through their handheld devices rather than having to verbally give their quotes to specialists.
According to many brokers on the floor, the software release is the biggest since the NYSE automated CAP, or conversion and parity, orders in December 2002. The automation of CAP orders—those involving large lots of stock that are executed gradually throughout the day to follow the market—led to huge productivity gains and a dramatic decrease in the amount of paper on the floor. It is estimated that written tickets for an average of 16,000 CAP orders and some 240,000 reports were eliminated daily from the floor as a result of the automation.
“This is a huge release that’s going to eliminate the clumsiness and errors associated with handling paper,” said Mr. Charlop. The latest software upgrade, he said, will further free brokers from having to manually write tickets for customer orders and enter reports of executed trades into their systems.
“All these improvements will make us faster as a market, and in today’s environment,” he said, “that’s exactly what we need to do. It’s critical that we increase all components of speed.”
