learning from the present

Today I saw a story about the big bang at the NYSE. Electronic trading likely to wipe NYSE floor of unique character

The story relates to the transition to electronic trading by the NYSE some 20 years after the London Exchange and fears that many or most of the colourful brokers will be gone.

What I find the most interesting, is that some of those brokers have been preparing for this for 20 years and have progressively used all kinds of technology to give them an edge already. After the transition, the counter cyclical view is that those people will still be able to provide great value to their clients because their core judgement skills and market instincts will still be needed even though the change to some (or most) of the information flows may have levelled the playing field.

The other related idea I like; is that being first with the technology may not be the huge advantage it once was. In fact, being late with the technology for part of the cycle may be an advantage in that the NYSE have had 20 more years to learn about the technology impacts and implications to redefine themselves and their core services.

Either way it will be an interesting transition to follow and supporters of the survive and thrive view point to the Chicago exchange where the trading floor has survived the advent of large scale electronic trades.

In a nutshell this story illustrates to me the role that technology can have. That is – it takes away some of problems around the timeliness of information. It leaves the brokers free to make descisions based on better quality information and will even adjust the risks of particular options. But it is still no match for the actual judgement calls each broker will still need to make.