Friday at the NYSE--7/22/05
Points from the day's discussions that caught my attention.
Specialists: by Sean McCooey, Managing Director and Executive Floor Official---LaBranche & Co.
- A Specialist is the person on the floor of the NYSE at the point of sale who manages the trading.
- Due to the amount of capital needed to underwrite a Specialist, consolidation has taken place. Currently, only 7 Specialists firms remain. At one time there were many small firms and even a few individuals who had enough capital to do their own underwriting as a Specialist. The 1987 crash wiped out many of these, and the tech bubble burst took care of the rest.
- The Floor Brokers and the Specialists are salaried employees of their respective firms and receive a bonus at the end of the year. Previously, when a specialist owned his own firm, he made or lost what he made or lost.
- Independent Brokers buy or lease a seat on the Exchange and work for themselves. They trade the overflow orders from major brokerage firms on the floor. They bill each firm at the end of the month for the number of shares they have traded for the firm.
- A Specialist may not sell from his firm's stash of shares if the last price is a down price (downtick). By the same token, he may not buy for his firm's stash if the last price is an up price (uptick)
Human Resources: by Dale Bernstein, Human Resources
- NYSE employees are evaluated not only on what they do but also on how they do it and how they relate to others.
- The issues in today's labor market are diversity, less staff, explosion of technology, and work vs quality of life.
- The work force trends and needs at the Exchange are to express thoughts clearly, read and understand directions, write quality sentences and paragraphs, use computers for basic tasks, perform fundamental math calculations, and employ independent thought and judgment.
- The keys to personal success at the Exchange are creativity, conceptual skills, cross functionality, concise communication skills, and team player skills.
- The NYSE values are integrity, excellence, respect for individual, customer commitment, and teamwork.
On the Floor of the Exchange:
We were on the floor of the Exchange for about an hour. A teacher from Atlanta and I were assigned to Robert W. Lucey. He is a Specialist employed by Bank of America and works at trading post 12, desk I. He supervises the market for Wal-Mart (WMT) and Lazard (LAZ), a financial and asset management firm. Robert had a wealth of information at his finger tips. He was so hyper he could talk a blue streak and execute trades at the same time. A great guy.
Odds and Ends From My Notes:
- There are 2775 companies listed on the Exchange
- There are 55 million investors
- Trading volume is 65 percent institutional investors, 20 percent individual investors, 15 percent hedge funds. Hedge funds want the speed of the electronic market.
- Odd lots go straight through the system unnoticed. (At one time investors had to pay extra transaction costs for odd lots---less than 100 shares).
- For Specialists the decimalization of stock quotes was a mistake. For years, stock prices were quoted in 8ths ($0.12); then the quote increment was reduced to 16ths ($0.06). Now with decimalization the quote increment is pennies. This has significantly decreased Specialist profitability.
- For my kids---Each specialist firm has a substitute on the floor to cover other's bathroom breaks. However, everyone eats at his own trading post between trades.
- After 4:30 Robert coaches his kids' soccer and softball teams.
A Great Day
In Conclusion:
The Exchange is a factory of prices. A place where all information comes together at a specific moment to determine a specific price for specific ownership shares in a particular company.
8:03:26 AM 
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