Technology Squeezes Out Real, Live Traders

NEW YORK -- David Miranda got hooked on "the floor" in a millisecond.

As a teen, during a visit to the New York Stock Exchange, he quickly identified with the guys on the trading floor, the ones wearing the trademark mesh-backed smocks with numeric IDs. They're the ones you see on the evening news celebrating Dow records. "I didn't know what they were doing," recalls Miranda, 43. "But I knew that's what I wanted to do."

The guys were trading stocks of the USA's greatest companies. Face-to-face. Auction style. With rudimentary pencil-and-paper technology. The trades, which required human intervention, took nine seconds.

Miranda spent 21 years on the floor, mainly as a "specialist," or market maker. He was there on Black Monday in 1987; the emotional first day of trading after 9/11; the day an aging specialist died executing what turned out to be his last trade.

"That's how I wanted to go out," says Miranda. "I wanted to die on that floor, too."

Little chance of that now. He was let go in February by Van der Moolen Specialists. He's one of hundreds of NYSE floor traders replaced by machines.

This is the harsh new reality on Wall Street, a world dominated by computers that execute trades not in seconds, but in thousandths of a second, or milliseconds.

Speed has become the holy grail on Wall Street. That means fewer opportunities for human traders to take part in trades, grab commissions, make money. With electronic trading capturing an ever-larger piece of the trading pie, specialists are quickly losing their dominance -- and profit potential -- just as vinyl records and pay phones did in the face of whiz-bang technologies.

The economic squeeze is expected to result in further shrinkage of the human population on the NYSE floor. Some say the floor is in danger of disappearing unless specialists and floor brokers reinvent themselves and figure out how to make money in today's machine-driven market. Currently, business is so slow, most action occurs in the first and last 15 minutes of trading.

"It's difficult to see anything in the near term that will revive the specialists' role," says Ted Wolff, analyst at Solaris Asset Management. "The floor-based businesses will continue to shrink until they become irrelevant and fold up shop. The floor won't go out with a bang; it'll go out with a whimper."

But Duncan Niederauer, president of Big Board parent NYSE Euronext, who is guiding the floor through these turbulent times, insists that while the floor's workforce may indeed get smaller, he's working hard to put floor traders in a position to succeed.

"My plan is not to close the floor," he says. "No one has proven that an all-electronic market is the answer." He says he's working with the Securities and Exchange Commission to get archaic trading rules changed to better even the playing field for specialists. The SEC has approved rule changes that let floor brokers trade a variety of instruments, such as bonds, Nasdaq stocks and exchange-traded funds, in addition to NYSE-listed stocks.

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