Managing Innovation Cases from the Services Industries (1988) / Chapter Skim
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Electronic Automation at the New York Stock Exchange
Electronic Automation at the New York Stock Exchange
Pages 82-107
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From page 82... ...
The Trading Process Ignoring for the moment the Exchange's automation programs, the flow of floor trading takes place more or less as follows: 82
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From page 83... ...
In either event, floor brokers take the orders received at their booths to the appropriate "post," where the stock in question is traded. The NYSE has its own central switch, Common Message Switch (CMS)
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From page 84... ...
Even institutions within the same category can have very different perspectives; for example, exchange staff, specialists, $2 brokers, floor brokers, upstairs brokers, or independent brokers with widely differing policies and mixes of business. However, there is another difference that can hardly be passed over; that is, the nature and characteristics of the typical "automated." Elsewhere, automation may involve automating production workers, shipping departments, or payroll departments operations with little individual power.
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From page 85... ...
In addition to consummating trades for those who enter orders, the Exchange provides vital services for those who have no direct connection with it, and who do not use its services explicitly. Like any marketplace, it not only "transacts," it also "sets value." The state of the Dow Jones Industrial Average, for instance, is taken by much of the public as a measure of the financial and commercial state of mind of the country.
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From page 86... ...
, but allows time to vary. A reasonable successor to the Call market might be one that offers both price and time advantages-a Competitive Dealer market (see Figure 2)
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From page 87... ...
A simple computation, using easily verifiable statistics, places the value of this reduction in interposition costs at more than $5 billion in 1986 alone a much greater savings than the cost of the entire NYSE, with specialists' profits included. Using its current market structure, the NYSE became the world's dominant equities exchange, and one whose value-setting mechanism had unequaled credibility in global financial circles.
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From page 88... ...
CHRISTOPHER KEITH AND ALLAN GRODY Continuously Arriving Orders FIGURE 3 Unitary Specialist market. Specialists act either as brokers (bringing together buyers and sellers)
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From page 89... ...
In 1930 the ultimate seemed to have arrived, the first "high speed" teletype system with a capacity of 500 characters per minute. By 1953 developments in magnetic drum recording made it possible to add automated voice announcements.
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From page 90... ...
Referring to the MDS, The New Yorker in its June 1965 "The Talk of the Town" said: The New York Stock Exchange has recently automated its stock quotation services to brokerage offices, the purpose of which is to give by voice over private telephone wires the pertinent current statistics on any listed stock that the inquiring broker wants to know about.... One should not confuse the Stock Quotation Service with the more familiar ticker which records completed trades by teleprint or on paper tape rather than by voice....
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From page 91... ...
At the end of the project, the securities industry and the NYSE had something that would prove more valuable than the elimination of the tube system-a set of uniform formats for teletypewriter messages in a user environment still very suspicious of any talk of computerized order delivery. Experiments and changes in the odd-lots arena did not really threaten the main, high-volume, profitable core of most key players' businesses.
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From page 92... ...
In a technical tour de force, CMS was brought on line to all 40 firms with which it interfaced in a single night, after having run in parallel with OLS for more than six months to ensure that it duplicated OLS results in all cases. What the NYSE now had was ostensibly an odd-lot system, interfacing with all of its principal customers and using standards that would apply equally to round lots.
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From page 93... ...
What CENTAUR envisioned, among other things, was floor brokers with batteries strapped to their belts carrying around floor terminals. These could not be nearly as miniaturized as today's models, and would be plugged in by hand at the various trading posts.
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From page 94... ...
-- 2~ _~ ~ ... ,.~ HAND-HELD TERMINAL MARK SENSE CARD Ad_ FIGURE 4 Designated Order Turnaround (DOT)
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From page 95... ...
With DOT, the era of meaningful support to the trading process had begun. THE CAPACITY ISSUE We must now introduce another motif central to the NYSE's automation priorities in the decade succeeding DOT-the absolute capacity to meet peak loads.
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