More NYSE Floor Traders Getting the Axe

If NYSE floor traders all get fired does that mean that CNBC will have to hire actors to mill about and shout during segments from the NYSE floor?

Granted, we’re nowhere near there yet, with this news being mostly about brokers cutting direct access traders who service institutional clients directly, but it is still worth noting. If nothing else, it is going to make a long overdue cut to an information conduit to the upstairs traders.

Goldman Sachs Group and Lehman Brothers Holdings Inc. plan to shut down their direct access floor broker businesses and fire traders at the New York Stock Exchange next month, as more trading activity moves to electronic networks, the banks said on Friday.

…The New York Post on Friday reported Goldman would cut nine trading floor jobs. Goldman said people who lose their jobs will continue working at the bank for 60 days.

Lehman Brothers spokeswoman Kerrie Cohen said the investment bank decided to exit the floor-based direct access business. The bank cut six traders as part of the move, a source familiar with the matter said.

These moves come as more trading volume shifts from traditional open outcry to faster, cheaper electronic systems. The NYSE in recent months rolled out a “hybrid” trading system, which has accelerated the shift of trading volume from the floor.

Earlier this week, Bank of America’s specialist business laid off 40 NYSE employees and said 20 to 40 more jobs may be cut. LaBranche & Co. , the Big Board’s leading specialist firm, fired about 165 traders between 2001 and December 2006.

The company’s chief executive said in December that LaBranche could lay off another 80 or so traders in coming months.

[via Reuters]


  1. richard riker says:

    What they didn’t mention is that there is a rumor that Lehman Brothers is going to close it’s floor operations completely! It will be quite interesting to see the number of “leases” that were re-newed as of Jan. 1. Many floor brokers have a short leash on the future! there is a bigger fundimental problem occurring in that the two service providers on the floor; spec. and floor brokers,are no longer able to provide their typical value adds.
    Hybrid has taken the traditional ability for the spec. to be the price determiner and much of the flow is now hidden and of no informational use to him. He also is no longer able to be seen as a capital facilitator to the market and that value add is challenged. The floor broker has some similar problems because he has lost his source of trading info – the spec. In addition, there is no longer the ability for a trading crowd to effectively interact with each other and the spec. book without placing their orders in it.
    If you combine these trends with the growth in the umber of trading venues and the ability to access the market directly for most participants, you can see what is driving the recent decisions by GS and LB (thought the GS layoffs were at their spec. unit). Unfortunately for the floor, gravity might ultimatley determine its fate.
    I thought I would pass along my thoughts on this subject and will keep an eye on your blog!

  2. I’m still surprised the NYSE is still so caught up in sentimentality. I say get rid of all the floor traders. Anyone who thinks they are providing a positive service for anyone is deluding themselves.
    (It’s going to happen anyway, so why bother pretending it won’t?)

  3. Joe has no idea, and Riker does because Riker was a specialist himself. The traders add value because there are still institutions who do care about price over speed. Furthermore, something larger is occuring that is changing the landscape of the equity markets. Commission rates are coming down dramatically, forcing the sell side(gs, bs, lb, dbk, etc.) to find ways to lower their fixed costs. Their trading desks are making less money, forcing them to reevaluate their cost structures.

  4. Paul — My compliments on your insightful blog and the good discussions it generates.
    Disclosure: I edit NYSE’s HybridTalk blog at:
    The success of the NYSE Hybrid Market model depends on our getting the balance of auction and automation right, and on our floor traders demonstrating to customers that they still add value.
    I know a number of direct-access brokers and others who are adapting and doing well with the new market model. As people get better at using the elctronic trading tools, and as the tools themselves improve, I believe there will continue to be a role for floor traders.