Wednesday. Day Three at the NYSE.
Significantly more police were at work this morning.
The NY City police may have been working more, but I was working less---scanty notes from today. The material was most interesting, but I was pooped out. I also decided that today's material could be found some place in their print materials (true or not?).
Our meeting room is officially called the Presidents Room. Note the portraits of the NYSE presidents around the room. Some of them weren't in power very long. The portraits used to hang in the Board Room. They recently updated the Board Room and the portraits were moved here.
After our continental breakfast at 9:00 (a later starting time this morning) Regina Mysliwiec, Senior VP of Market Surveillance and Regulation, discussed surveillance and regulation.
The Market Surveillance division is responsible for monitoring trading in NYSE-listed securities and investigating activity for compliance with Exchange rules and federal securities laws that might involve insider trading, market manipulation, frontrunning, market-maintenance obligations, and governing members' on-floor trading and auction-market procedures. The division is also responsible for floor-member education, market quality, intermarket communications and rule development.
She talked about the Exchange's investigation of the broker member firms. The surveillance system is setup to track every keystroke on every trade so they can retrace all trades. That data is carefully monitored.
Robert Marchman, Senior VP of Enforcement---
Mr. Marchman is responsible for coordinating and directing investigations and litigations, and contributing to Enforcement policies and procedures. Additionally, he is responsible for the units conducting investigations of potential violations by specialists and floor brokers.
(I didn't take any notes at all) These speakers were all top notch, their topics interesting, and their Q and A well done, but my brain wasn't yet in gear.
Before lunch we went upstairs to see Sheldon Richter the StockWatch manager in action. That woke me up!
Market Surveillance is responsible for oversight of all trading activities on the Exchange trading floor and in NYSE-listed securities by member firms.
Market Surveillance ensures auction-market principles are being fairly maintained, including checking for abusive or manipulative trading practices and insider trading. It also develops rules and evaluates specialist and floor-broker performance.
The division uses sophisticated computer technology to detect, real-time, any unusual or violative trading patterns, and surveillance staff maintains a presence on the floor.
The division's Stock Watch unit combines the human judgment of analysts with electronic data-mining and pattern-detection systems, links to news and research, as well as public databases of officers, directors and other insiders to detect possible insider trading.
Market Surveillance takes disciplinary action for certain rules violations, and refers other matters warranting formal disciplinary action to the Division of Enforcement, or the SEC, for matters outside NYSE jurisdiction.
Following referrals by the NYSE's Market Surveillance Division in 2003, the SEC instituted six enforcement actions for insider trading against nine individuals and firms, resulting in asset freezes, fines and penalties totaling $5 million.
He spent 30 minutes describing how he monitors the trading of all securities on the NYSE. The computer system is set to kick out unusual patterns. When a stock is highlighted on his system, he must determine the possible cause of the aberration. This is a great explanation of how the system works. This is fascinating stuff---trading halts!
Regulation isn't my cup of tea, but surveillance has possibilities.
After lunch it was Robert McSweeny, Senior VP of Competitive Position, talking about the NYSE competitive position. In other words, what is different about the NYSE. What is its niche. The NYSE sees its competitive features as:
- Specialist participation---the ability to buy and sell between the spread
- Capital commitment of the Specialists
- Specialists feature of the NYSE that allows buyers and sellers to meet face to face to negotiate the best prices
The NYSE's main competitors are the Nasdaq, Archipelago, and ECNs.
Nicole Keeler from the Website department got us all jazzed with a demonstration of the new NYSE website----and of course new features are constantly being added. Check it out. The fun interactive page is the NYSE MarkeTrac virtual trading floor found in the right column of the home page. Click on it and have fun!
Our last presenter of the day was Ronald Jordan, VP of the Market Data Products division discussing various data products sold by the NYSE. The #1 revenue source for the NYSE is company listings and the #2 source of revenues is data. The NYSE sells data to 1600 customers who use the data themselves or repackage it for their customers. Individual investors receive NYSE produced data through streaming real time quotes via Yahoo and online brokers. One of the highly visible corporate customers of NYSE data is CNBC.
In addition, the NYSE produces and manages the consolidated tape. The government requires a consolidated tape that reports all the stocks and prices from all exchanges lumped into one reporting tape.
After Ronald Jordan finished answering questions (all speakers had a Q and A period---good questions---informative answers---no pat answers) Murray Teitelbaum found out that we would be able to participate in ringing the opening bell on Thursday. The company that was going to ring the bell had just decided to do the closing bell instead. Murray's teachers don't often get to do this. Because there is space on the podium for only 14 people we had to draw names out of a hat for those who would get to be on the podium. The rest would be on the floor under the podium and would also have their pictures taken. I was so excited. My name was one of those drawn. Needless to say, as soon as I got back to the hotel I called L and Daughter to make sure they Tivoed the opening of the Exchange on Thursday morning.
Wednesday evening at 6:00, Murray (NYSE Education funds) treated us to cocktails and hearty appetizers (supper) at Becketts on Pearl Street.
The end of another really great day!
10:44:41 PM 
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