Thought I’d share the latest with those of you who closely follow the ongoing changes in the NYSE market model (and, may I say, bless you). I know that many of you don’t have a spare hour to do things like listen to our quarterly financial-results conference calls. Which is why you have your humble blogger, because my time is either priceless, or worthless, depending on how you look at it. Anyway. So here is an excerpt from the Tuesday 5 Feb. call that I thought would be of interest:

Roger Freeman, analyst, Lehman Brothers: Okay, and Duncan, lastly, can you give me an update on discussions that you’ve been having with the SEC around changes of the specialist market structure and specifically, as you look at buying the AMEX here does that give you any additional ability to drive an agenda since effectively you’re going to be taking care of all of the equity exchange specialist operations, modernizing them?

Duncan Niederauer, CEO, NYSE Euronext: Sure, the first part of your question, Roger, is the dialogue continues very regularly and very actively. I think we’re down to where we really just have two or three rules left. One has to do with their ability to hedge and really run their business as an integrated market maker which there’s a follow-up meeting on tomorrow and I think we’ll be filing a rule on that front fairly soon about, then the other two changes that we’re contemplating making that will be concurrent with the next phase of the technology that rolls out that Larry was referencing earlier will be tied to what I would call the elimination of the look that the specialist has had pretty much forever, in exchange for probably slightly better treatment on the parity side. I think that’s where we’re going to head with that.

In terms of the AMEX integration, I think that should over-simplify the landscape because it is the only other model that has what I would call close to a high-tech, high-touch model, and I think we intend to bring that over here as possible. The ETF business - I don’t think we’ll reinvent the wheel. I think you’ll see that go to Arca. The listings business - I think you’ll see us create
just a slightly different approach on the listings side to account for all the different companies. And then as far as with their model with the specialist is, many of the specialists there are also specialists here, so we imagine that if the initial conversations are any indication, they will just consolidate their businesses and do it in one place instead of two and many of the ETF specialists are also LMMs on the NYSE Arca platform so we would imagine that they would just move over as well. So I think that’s all kind of to be determined but that reflects the initial conversations we’ve had with some of the issuers and some of the market participants over at the AMEX.

And on the technology rollout that Duncan referenced, here is that commentary from Larry Liebowitz, our executive VP in charge of U.S. Markets and Global Technology:

So turning to page four [of the slide presentation]. This is a diagram similar to what we’ve shown you in the past but now we’re going to lay out exactly how each layer occurs and when it will probably occur. So the top line is CCG [Common Customer Gateway]. That’s how our clients reach us. That’s also going to be how any client in any geography reaches any of our products ultimately, and what it also does is it makes it easier for us to make the technology transitions in the layers beneath because the customers will only be affected by the top layer. As we’ve talked about in the U.S., we expect to roll this out in the first quarter and I’m happy to report that our specialists are already converting to the system, that should be done by this week and that we should be able to rollout to our first clients by next week so that’s proceeding on path and then in Europe, we hope to be rolling this out to customers by the second half of the year, specifically in the July time frame, we’ll start to roll that out. That is absolutely critical to us in terms of getting–not only getting positioned for a platform consolidation but in the U.S. that gets us off our first wave of non-stops which we’ll talk about in a minute.

BTW, if you do have the time and if you’re interested in NYSE Euronext as a whole, here are the full transcript and the audiocast (free registration required for the latter).

I don’t have anything more definitive right now about the approvals or the timing, but obviously the next few months are going to be busy, and, I expect, productive. Will continue to keep you posted on new developments.

In the meantime…

Today in NYSE History
07 Feb 1967 — A blizzard caused the NYSE to curtail the trading day, opening 15 minutes late and closing 90 minutes early.

Another day, another bunch of electronic-message-traffic records falling. Starting at 3:53 p.m. today, I started getting e-mails about new system records, and have gotten 23 such messages since. SuperDOT, market data, Common Message Switch, quotes, on and on.

Am tied up on other stuff right now but will try to update this with the latest numbers tonight, after the dust settles.

I posted too soon. Just got a bunch more messages — even more traffic records across more systems at today’s close:

PSS [Post Support System] 30 sec throughput record of 51173.0 messages per second established at 15:45:30. Replaces previous record of 49978.6 messages per second established on 01/23/2008 at 15:02:30.

IGS [Someone please remind me what this is: Internal Groovy System?] 1 min throughput record of 27161.0 messages per second established at 15:46:00. Replaces previous record of 26001.6 messages per second established on 01/23/2008 at 15:49.

MDS [Market Data System] 1 min throughput record of 6949.6 messages per second established at 15:46:00. Replaces previous record of 6822.1 messages per second established on 01/23/2008 at 15:50:00.

CQS [Consolidated Quote System] 30 sec throughput record of 31167.5 messages per second established at 15:45:00. Replaces previous record of 31008.5 messages per second established on 01/30/2008.

PSS 1 min throughput record of 47111.7 messages per second established at 15:47:00. Replaces previous record of 46415.8 messages per second established on 01/23/2008 at 15:02:00.

SDT [that’s ol’ SuperDOT] 5 min throughput record of 32679.8 messages per second established at 15:48:00. Replaces previous record of 32339.8 messages per second established on 01/23/2008 at 15:46-15:50.

CMS [again, Common Message Switch] 5 min throughput record of 32931.8 messages per second established at 15:48:00. Replaces previous record of 32589.0 messages per second established on 01/30/2008 at 14:33-14:37.

OK, I’ll put away the new toy. For now.

This is perhaps kind of “inside baseball,” but for those of you who are interested, here goes.

A colleague recently set me up to get e-mail alerts every time we set a record for electronic-message traffic. For you laymen like me out there, those messages represent orders, trade-execution reports, cancellations and the like.

It’s like a new toy for me, especially on days like today.

Starting the same minute the Fed made its announcement at 2:15 p.m. today, sending the markets spiking, the wheels really started spinning here. Things have calmed down long since, but FYI, here are the messages I got in rapid succession:

CQS [that’s Consolidated Quote System] 30 sec throughput record of 30915.6 messages per second established at 14:15:30. Replaces previous record of 30883.1 messages per second established on 01/23/2008.

CQS 5 min throughput record of 29327.5 messages per second established at 14:19:00. Replaces previous record of 27352.0 messages per second established on 01/23/2008 at 15:47-15:51.

CQS 5 min throughput record of 29693.8 messages per second established at 14:20:00. Replaces previous record of 29327.5 messages per second established on 01/30/2008 at 14:14-14:18.

CMS [Common Message Switch] 5 min throughput record of 32589.0 messages per second established at 14:38:00. Replaces previous record of 32534.3 messages per second established on 01/23/2008 at 15:46-15:50.

CQS 30 sec throughput record of 31008.5 messages per second established at 14:37:30. Replaces previous record of 30915.6 messages per second….

I might have missed one or two while cutting and pasting that. The important thing is, no hiccups, knock wood. As I’ve said, we aim to be available when you need access to the market, and that goes double when *everyone* needs that access, all at the same time.

Half a dozen traffic records in a half-hour’s time. That’s why we spent more than $25 million on expanding the capacity of our systems last year. Someone thought that would be a much better use of the money as opposed to doing something like, oh, say, just for the sake of throwing something else out there…like dropping it into my bonus. Can you imagine? Me neither. Oh well. There’s always next year.

This all may be pretty far down in the weeds, but I’m just trying to shed some light on how the wheels go ’round and ’round. Some kinda Druid dude, lifting the veil, as Dr. Winston O’Boogie once put it — that’s my goal.

Hope all those messages are going your way, thanks for sending them, and keep ‘em coming!

If you have a Dow Jones News Service feed, I recommend looking up this interesting piece: “TALES OF THE TAPE: Back Against Wall, LaBranche Still Kicking.” Sorry I can’t provide a link for those of you who don’t. Dow Jones doesn’t appear to publicly post these wire pieces, which is a little ironic given that the article ends with a boilerplate solicitation for feedback, which would be far more productive with a more public audience.

It’s also unfortunate that that if you query LAB on WSJ.com, you get Specialists to Be Replaced With Tumbleweed, a MarketBeat blog post and also a thought-provoking piece, but one that is two months old. Yet, only wire subscribers can see a fresher take from just two days ago.

Anyway, here are some excerpts that I thought would be of interest to those of you who have written me about specialist participation in the market:

. . . While two of its seven competitors have closed shop and pundits have pronounced the specialist industry to be dying, LaBranche returned to profitability in the fourth quarter and said it was in a better position than it has been in years.

This is probably due to the stewardship of Chairman and Chief Executive Mike LaBranche, the grandson of the 117-year-old firm’s founder, who has vigorously reinvented the company in a bid to keep pace with the changing landscape of exchanges.

The question is whether this will be enough for the company to make a sustainable comeback.

Trading volume on the NYSE has grown rapidly - something that market-makers and specialists usually benefit from. Yet revenues and profits for specialists have been inconsistent in the past five years, as the migration to automated trading at stock exchanges has accelerated, eliminating their opportunities to trade with an informational advantage.

“There’s no denying the fact the market - the trading today is purely electronic,” CEO LaBranche said during an earnings call last week.

“As a result, we are working very hard to develop our algorithms, to basically interact in the market electronically in some of the same ways that human beings were able to do it before and we’ve worked very hard on it and I think that we’ve made some pretty good progress with that too.”

Specialist firms have encountered other setbacks, including a $247 million regulatory settlement and recent rules that make it harder for them to trade profitably while stabilizing short-term market volatility. . . .

CEO LaBranche says today the company derives well under 50% of its revenue from its specialist business and that headcount would probably continue to be lowered there, although the operation would not cease to function.

“I think that there will be a floor for some time and I think it’s good for the New York Stock Exchange or any exchange.”

NYSE Euronext CEO Duncan Niederauer has been keen to find a place for specialists alongside automated trading, largely because its brand is so closely tied to the image of floor trading. He has worked to loosen some of the trading restrictions on specialists in an effort to make it easier to perform their function.

Those comments naturally piqued my curiosity, so I found a transcript of the original conference call, courtesy of Seeking Alpha. Following are excerpts relating to the NYSE trading floor, some of which are redundant with the Dow Jones piece above. I offer them here in the interest of helping readers better understand the issues, as seen by the head of a leading specialist firm.

Daniel Harris – Goldman Sachs: I was wondering if Michael you could comment on the acquisition by a broker recently of Van der Moolen and you know there are some publicly traded peers out there talking about wanting to be more involved potentially in the specialist business. Just get your thoughts around what they’re seeing in the model that maybe is changing and more positive going forward.

Michael LaBranche: I can’t really speak for a large firm why they came in the business but I can give you my insight of what I think why it would make sense. We’re moving towards an integrated market making model. I think a lot of the barriers that exist in the business are, for example the way rule 98, which is the Chinese wall rule, exists today, is not actually in keeping with the times and I think there is some anticipation that there will be more interaction across different products and venues. I think that’s part of the thing that’s driving it.

Regardless of whether or not people think that the cash equities business is a good business or not it’s still an important business and there’s also a link to issuers which also would yield positive benefits for a large broker, being close to companies. For example, we are a specialist in 570 companies of which we work very closely with the management of those companies and we have always done that. It think that may be part of it as well.

There’s other things that are in the works too. Changing some of the tick rules, changing some of the capital requirements, all these things should make the business more palatable. As I’ve said before it’s been a big adjustment to the current market structure. There’s no denying the fact that the trading today is purely electronic. There are situations where human judgment adds significant benefit to the marketplace in deploying capital in unusual trading situations but by and large trading is fully electronic.

As a result we are working very hard to develop our algorithms to basically interact in the market electronically in some of the same ways that human beings were able to do before and we’ve worked very hard on it and I think that we’ve made some pretty good progress with that too. But the reason why I think that Lehman Brothers came into the business is they saw these opportunities.

. . .

Daniel Harris – Goldman Sachs: Okay, great and then just lastly a couple of more quantitative things. First of all, on the employee headcount side, do you feel that you’re at a level now that’s more stable or do you anticipate that that’s going to go further. And then on the participation rate that you guys are seeing in the market these days, can you just comment on that, thanks a lot.

Michael LaBranche: Very quickly on the participation rate, I don’t really have it in front of me but I think it’s stabilized and gone up and I think that the more that we trade electronically the better we do with our participation rate.

Also, in terms of headcount. Our headcount at the specialist division, the LLC, went from a high of 427 people in 2003 down to 97 people today, so you can see that that’s more than a 75% reduction. I’m not sure where our headcount is going to go but I don’t imagine it’s going to go up there and where is our headcount for the overall company has gone down by about 40% during the year of 2007. 428 to 257, a little bit more than 40%, we really reduced our headcount and I can’t tell you where the headcount is going to be but trends are that capital matters, that technology matters, electronic quoting capabilities are what’s important so that you can do a lot more with fewer people and that certainly seems to be the trend and we’re going to keep looking at it that way and we will manage our costs with that in mind.

Richard Repetto – Sandler O’Neill & Partners: Hello? Hey Michael, first I guess the first question, not to put you on the spot, but you made some statements so far about the electronic environment and how everything is going electronic in Europe, essentially electronic, it begs the question, do you think we really need a floor then?

Michael LaBranche: Well, I’ve always been friendly to new things I think. But I think that’s it’s good to have a floor. I think it’s good for people to have a place for people to meet and remember I think that when the markets get unusually volatile, it’s good to have a meeting place for people to be able to negotiate trades. I think the vast majority of trades are done electronically and essentially they’re done in electronic systems so it’s not really on the floor.

The floors down substantially, we as a result have reduced our headcount down there from 330 at the peak down to about 60 today, so you can see that that’s a lot less than it used to be. I think that there will be a floor for some time and I think it’s good for the New York Stock Exchange or any exchange, it’s good for the CME to have a floor as well. I do think that we need to reduce costs there and it can’t be something that costs you too much in costs and certainly moving away from the manual market that we have has given us the ability to reduce our costs significantly.

. . .

Mike Vinciquerra – BMO Capital Markets: And staying on that front, you mentioned better capital utilization a couple times in this call, with all that excess capital, are there opportunities for you to move into either new or complementary businesses or to add some tuck in acquisitions that would help you be stronger either in in options or ETFs or your structured products group in general that we might look forward to?

Michael LaBranche: Well, we are. I mean we are expanding quite rapidly in London, we’re expanding in Hong Kong, we’re looking at opportunities there, there’s big growth in ETFs both in Asia and in Europe so that’s an opportunity for us and we’re going to use our capital in those places that are growing and it’s pretty simple. If you look at this company, it’s a completely different company than it was five years ago, we recognized that things were going to change, we didn’t know how quickly they would change but we knew they would change eventually and we’ve really focused on areas that are not the public sees as our traditional businesses.

I think our company’s stock price suffers from the fact that people turn on CNBC and they see the floor empty everyday and I think that it just gives the impression that we don’t have a business there, but we do have a business there and we have businesses other places and that’s why we’re going to take our capital and use it.

. . .

George Walsh – Gilford Securities: Any updates besides the, you know there’s the pool for the change of the regulatory capital debt reduction but how about some other things regulatory wise like the odd lot rule and how that’s progressing.

Michael LaBranche: The odd lots have been a significant problem for us. They still are a problem, although we hear that they’re trying to eliminate the abuse that’s going on there, we’re still very concerned about using the systems in a [violative] nature so that hurt us a lot and I think we’re going to get it fixed and we’re working on fixing it as well but that would be a good thing for us and that would be a good regulatory change.

There are other things besides the NLA reduction which are going to be beneficial, I believe there’s going to be a new kind of order form being introduced, I think that’s more, if you were to ask maybe the New York Stock Exchange about and I think they’re working very hard to make the floor more competitive and the market share which I think is down to something like 39-40% has stabilized but I certainly think it would be better for us if it was higher. But they are actively seeking to change some of the rules that will help the floor be more competitive.

Marc Sulam – Healy Circle: In response to the last question, do you sort of [insure] there were some other regulatory changes that were going on which would change the rules, I think of the role of the specialist and be beneficial to members or specialists on the floor. What do you think the time frame of those changes could be, that’s the first question.

Michael LaBranche: Marc, I’m hoping months, you know a few months and again that’s really not up to me to be proposing the changes we just kind of look and see what’s going and adapt to it. But hopefully the changes that are going to take place are going to be within a few months, it’s up to the regulators, the SEC to approve those changes naturally.

But as I said also earlier in the call, the world’s changing, the way stocks trade and stocks aren’t going to be traded in the silos anymore, they’re going to be traded as part of a bigger package and I think you’re going to see more integration of different securities interacting in the marketplace and so I think that over time you’ll see that the cash equities business is just one piece of the puzzle and that things are all pretty much integrated so that it’s going to look completely different.

As always, your comments are welcome. Have a great weekend, folks!

I know this is nowhere as newsworthy as Monday’s swoon in markets around the world. Or yesterday’s drop, bounce, drop, bounce, and ultimately, drop. Or today’s decline, rally, decline, rally, decline, and session-ending rally. Or any other words for the recent market moves that you can think of. No, not near as newsworthy as all that.

But.

Apart from all that activity, the last three days here (including last Friday) saw successive records set each day in message traffic coursing through our electronic systems. Not headline-making stuff. But when the market is moving, the last thing you need is for the market itself to break, technologically speaking. That’s why we spent more than $25 million last year alone to increase our systems’ capacity.

Today’s share volume, which was well north of 2.8 billion shares on the NYSE floor alone last I looked — looking like perhaps our second-highest ever — is just the tip of the iceberg, the piece you see and can get your head around.

While I was on the floor just before the close today, a screen at our operations center was reflecting 16 system records and the numbers were still spinning like a speedometer in a Bugs Bunny cartoon. For the third consecutive session, we had record numbers of orders (187,232,513); quotes (both from here alone, 83,009,863; and consolidated, 476,750,885) and reports (200,398,251).

Not to bore you with a lot of statistics, but let me just pick out one central system — our Common Message Switch (CMS) — and tell you that we broke records multiple times today, and those records had been set yesterday, which themselves topped records set on Friday.

Measured over a peak 30-second period today, CMS averaged 40,429.1 messages per second. During a 1-minute period, it was 36,894.0 messages per second; and over a 5-minute stretch, 32,534.3 messages per second.

For an old-timer like me, I never thought I’d see numbers like these. And for those outside of these four walls, like I said, this is all remarkable mostly for what *didn’t* happen. Our goal is to be there when you need us, to get you those reports and cancels fast enough that you can do something else, put up those quotes quick enough that you can get those best prices, here or (perish the thought!) away.

Most of all, to all those customers sending us all those millions of messages, let me say thank you. Keep ‘em coming!

NYSE has invoked Rule 48 again today, as we did yesterday. That means that mandatory opening indications are not required.

Hey, if you subscribe to our System Status Notifications via RSS, you don’t have to wait ’til I get around to telling you this stuff. In fact, yesterday I missed it altogether, because I was away from my desk at the time. So RSS is the way to go.

Here’s the background on the rule, mostly lifted from our NYSE.com/Hybrid page:

Today, New York Stock Exchange has invoked Rule 48, which provides the exchange with the ability to suspend the requirement to disseminate price indications and obtain floor-official approval prior to the opening when extremely high market-wide volatility could cause floor-wide delays in opening of securities on the exchange.

Rule 48 is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair floor-wide operations at the exchange by impeding the fair and orderly opening of securities. Accordingly, the rule sets forth a number of factors to be considered before declaring such a condition, including:

– Volatility during the previous day’s trading session;
– Trading in foreign markets before the open;
– Substantial activity in the futures market before the open;
– The volume of pre-opening indications of interest;
– Evidence of pre-opening significant order imbalances across the market;
– Government announcements;
– News and corporate events; and,
– Any such other market conditions that could impact floor-wide trading conditions.

The invocation of Rule 48 is in effect only for today. Previously, the NYSE invoked the rule on Jan. 22, 2008; and Dec. 12, 2007. The rule was approved by the Securities and Exchange Commission on Dec. 6, 2007.

And your daily bit of history:

Today in NYSE History
23 Jan 1895 — The NYSE recommended that listed companies publish annual financial statements.

That was no mean feat at the time, encountering a lot of resistance from many companies. But it was an important, early step toward the strong system of corporate disclosure and governance we have today.

Starting 25 January — a week from tomorrow, kids — NYSE will change the unit of trade in Berkshire Hathaway (BRK.A) to one share, from the current 10-share unit. BRK.B will continue to trade in 10-share units.

According to our memo on the subject, this will enable all orders to be exposed to the published quote, and both BRK.A and BRK.B will now route to competing market centers as per Reg. NMS.

The memo includes information about what will happen to pending GTC orders in BRK.A; if you’ve got one, check it out.

So now I can buy a single share of Berk A, eh? That got me thinking, what else can you buy for that money (about $127,000 a share yesterday). A quick bit of Googling revealed you can:

– Pick up this 2006 Bentley Continental, with: “Pwr Lock Pwr Window A/C Rear Defrost Side Air Bags Power Tilt Steering ABS Brakes Electronic Damping Control Maintenance Records CD Changer - OEM - 6.00 Heated Rear Seats Warranty Books Auto-Suspension On-Board Computer Parking Distance Control Security System Sunshade - Power Trip Counter Power Mirrors Power Trunk/Liftgate Woodgrain Interior Package Xenon Headlights Pwr Steering Pwr Seats - Both Cruise Ctl AM/FM Radio Dual Air Bags Power Telescopic Steering Owner’s Manual Directional Stability Control Memory Seat Heated Seats Dual Air Conditioning Navigation System HomeLink Fog Lamps US EPA Label Heated Mirrors Traction Control Trip Computer Floor Mats Cooled Seats Steering Wheel Audio Control Power Folding Mirrors.”

For $127,000, I’m sure glad they throw in the floor mats.

– Or, perhaps this inlaid cherry desk bookcase, “which experts believe was probably made in Maysville, Kentucky, around 1790-1810. The piece, also called a Hepplewhite butler’s desk with bookcase, is possibly by a Mason County school of design. It has extensive inlay including four eagles with a “liberty” cap. The desk was owned by Revolutionary War soldier George Carlyle, who immigrated to Woodford County, Kentucky, in 1779.”

– There’s also this 4-bedroom, 2.5-bath house in Seagoville, Texas, “formal dining, plus a 1 car garage, just waiting for new owners. The pride in ownership in this home will be noticed the minute you walk in the door. There are ceramic tile floors in the kitchen, dining area, family room, hallway, and baths. There are French doors that open onto the covered patio, crown molding, can lighting, custom paint, ceiling fans, and 2 blinds through out. The kitchen offers an electric range, ceramic tile backsplash, a breakfast bar, and 2 pantrys. The master bath offers a jetted tub to relax in after a long day, a separate 12 x 12 tiled shower, his and her sinks and walk in closets. The patio is covered which makes this a great back yard for family barbecues. For backyard privacy you will have an 8 foot fence with metal post. For the extra things you need to store there will be a storage building for you also. There are 2 water heaters, zoned heat and air, plus the roof was replaced in 2005. You don’t want to miss this adorable home.”

Me, I think I’d opt for the Berk A. If you want to forward me the $127 grand, I’ll be happy to test out the single-share system and report back the results.

From Tahiti.

Today in NYSE History
17 Jan. 1946 — The Federal Reserve Board set margin requirements at 100 percent, temporarily eliminating all margin trading.

This announcement might not get a lot of attention, and I understand that — there’s a lot of other things going on and rumored to be going on these days. But I think it’s important, nonetheless:
NYSE Euronext Appoints Todd B. Abrahall and Michael J. Rutigliano as Liaisons to NYSE Specialists and Brokers
– Both Will Help Advance NYSE Equities Market Model – (NYSE.com).

NYSE Euronext (NYX) has announced the hiring of Todd B. Abrahall as Vice President, Specialist Liaison; and Michael J. Rutigliano, Vice President, Broker Liaison. Each will be responsible for helping to advance the New York Stock Exchange equities market model and serving as liaison with the NYSE specialist and floor broker communities, respectively.

Mr. Abrahall, who will work with NYSE specialists, also will lead the discussion with regulators concerning transforming the NYSE market model into one featuring more value-added participation by specialists. Prior to joining the NYSE Euronext staff, Mr. Abrahall was president of Susquehanna International Group’s NYSE specialist operations, overseeing the firm’s unit on the NYSE trading floor.

Mr. Rutigliano, in addition to serving as liaison with NYSE floor brokers, will lead efforts by the NYSE to bring greater opportunities for the agency community of the NYSE trading floor to demonstrate their continuing value to customers. Before being hired by NYSE Euronext, Mr. Rutigliano was managing director of WJB Capital Group Inc., overseeing the firm’s operations on the NYSE trading floor. He is a past president of the Organization of Independent Floor Brokers.

“Both Todd and Mike are well respected by their constituencies and have years of battle-tested market experience. Having them advocate for their constituents both inside and outside the NYSE will be instrumental in putting forward the NYSE market model in its primary role – that is, serving the needs of its customers,” said Louis G. Pastina, Executive Vice President, NYSE Operations, to whom both Messrs. Abrahall and Rutigliano will report.

To me, this underscores that specialists and floor brokers continue to be important parts of the NYSE market. We’re investing in the trading floor, not walking away from it. Todd and Mike know the issues, and I’m confident they will help us — and customers — realize the full value of our trading model. Welcome to the team, guys.

Here is Bill Janeway of Warburg Pincus, as quoted by Tim O’Reilly (via Paul Kedrosky’s Infectious Greed blog):

…as driven by the web more generally, the frontier between human and machine-decision making has become radically problematic. First, quantitative approaches in trading, pricing, valuation, asset definition vastly expanded the domain for machine decision-making. But then the humans struck back, by refusing to act like the mindless molecules that the models driving machine decison-making required. The self-reflective, behavioral attributes of human market participants is now driving back that frontier, requiring innovations in every aspect of financial market processes, beginning with techniques of risk measurement and risk management. When price is an inverse function of liquidity and liquidity is an inverse function of price certainty, the recursive loop can only be broken by human intervention and action.

I didn’t mean to imply with that headline that I’m bored with the man-vs.-machine debate, though we’ve discussed it pretty extensively as it relates to the NYSE Hybrid Market. Both Janeway and O’Reilly are new to me, and I’m glad I came across them on Paul Kedrosky’s blog. Both are as articulate as anyone I’ve read on the subject.

Still, I’m waiting for the debate to get to a different place: when will we focus on man *and* machine instead of man vs. machine? How can machines better work as tools to serve the interests of humans in financial markets? To think that we must choose between one or the other is, to me, a false choice. It’s fascinating to watch John Henry take on the machine, but we’ve been doing that for over a hundred years, it proves none too good for John Henry, and doesn’t get us very far down the track of progress. It’s time to get further down the track.