New York: For most of the 217 years since its founding under a buttonwood tree on Wall Street, the New York Stock Exchange (NYSE) was the high temple of American capitalism.
Behind its Greco-Roman facade, traders raised a Dante-esque din in their pursuit of the almighty dollar. Good times or bad, the daily melee on the cavernous trading floor made the Big Board the greatest marketplace for stocks in the world.
But now, even as the Dow Jones Industrial Average reaches 10,000 for the first time since the financial crisis sent it tumbling last autumn, the exchange and its hometown face an unsettling truth: The Big Board, the symbolic heart of New York’s financial industry, is getting smaller.
Increased competition: Traders at the BATS Exchange in Lenexa, Kansas, on 8 October. The BATS Exchange is a world away from the shouting on the floor at the New York Stock Exchange. Ed Zurga / The New York Times
Young, fast-moving rivals are splintering its public marketplace and creating private markets that, their critics say, give big banks and investment funds an edge over ordinary investors.
Some of the new trading venues—dark pools, the industry calls them—are all but invisible, even to regulators. These stealth markets enable sophisticated traders to buy and sell large blocks of stock in secrecy at lightning speed, a practice that has drawn scrutiny from the Securities and Exchange Commission.
These upstarts are utterly unlike the old-school Big Board, which is struggling to make its way as a for-profit corporation after centuries of ownership by its seat-holding members. Last year, its parent company, NYSE Euronext, lost $740 million (nearly Rs3,400 crore today).
Wall Street’s judgement has been swift and brutal. Since January 2007, the share price of NYSE Euronext has lost nearly three-quarters of its value, even though stock trading overall has soared.
While the exchange has been under assault since the beginning of the decade, its decline has accelerated in recent years as aggressive competitors have emerged. Today, 36% of daily trades in stocks that are listed on NYSE are actually executed on the exchange, down from about 75% nearly four years ago. The rest are conducted elsewhere, on new electronic exchanges or through dark pools.
The old Big Board was far from perfect. Its floor brokers —who occupy a privileged, and potentially lucrative, niche between buyers and sellers—have sometimes enriched themselves at their customers' expense.
But changes inside the exchange’s grand Main Hall are startling. For decades, NYSE was the kind of place where sons followed their fathers onto the trading floor. But half of the jobs there have disappeared over the past five years. Many of the 1,200 or so remaining workers retreat quietly to their computers shortly after the opening bell clangs at 9.30am.
The Big Board has been forced to close one of its five trading halls, and it has repopulated two others with business from the American Stock Exchange, which NYSE Euronext bought last year. The Main Hall—the soaring, gilded room that opened in 1903—can seem little more than a colourful backdrop for CNBC.
“It has not been pretty,” said Benn Steil of the Council on Foreign Relations in New York. “All the big established exchanges around the world have experienced the same phenomenon, but the New York Stock Exchange has taken the biggest beating.”
It is a remarkable comedown for NYSE, and for New York. Once the undisputed capital of capital, the city is struggling to retain its dominance in finance as the industry globalizes. Wall Street seems to be no longer a place, but a vast, worldwide network of money and information.
©2009/THE NEW YORK TIMES