NEW YORK, April 21 -- Most days, the traders and floor brokers taking smoking breaks outside the New York Stock Exchange are a cocky bunch, given to wisecracks and fast talk. Not so on Wednesday, despite the robust stock market rally taking place inside.
Instead, the few who milled around in front of the NYSE's neoclassical columns looked glum and resigned. They talked as though they were witnessing the last days of a dying empire. And perhaps they were.
Trader Kenneth Polcari uses his handheld computer on the exchange floor.
(Richard Drew -- AP)
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The NYSE's announcement on Wednesday that it would merge with the electronic trading network Archipelago Holdings Inc. and become a publicly traded company has led many Wall Street observers to conclude that the days of human intervention in stock trades, of screaming brokers waving buy and sell orders, may finally be coming to an end after 213 years. While not everyone agrees, many traders appeared to be bracing for the worst.
"I'm pretty down," said one trader, who, like several of his colleagues, declined to be identified by name for fear of angering his employer. "I was expecting a lot of boos at the opening bell." Said another: "It's all anyone's talking about. People think they will probably lose their jobs in a year or two."
One floor broker was a little more hopeful. "People are still digesting it. Nobody knows exactly what it means. But it sure feels like the floor is eventually going to disappear."
Of course, this was just the view from the rank and file -- the floor brokers, traders and technical support staff who work for the NYSE's 1,366 members.
Many of these men and women come from blue-collar backgrounds, often from New York's outer boroughs. For them, a job at the NYSE, accessible only through a relative or family friend, could mean a ticket to lifelong employment and, if they thrive, a very nice living. Dick Grasso, who rose from an $81-a-week clerk to head of the exchange, is perhaps the prime example of the phenomenon.
On Thursday, many such workers seemed to resent that members were about to get even richer. And they feared, despite public pronouncements to the contrary, that their jobs would eventually be lost to faster machines. "The members feel good, but not us," said one trader buying lottery tickets at lunchtime at H.R. Scott, a tobacco store across the street from the NYSE.
The members themselves, who own "seats" on the exchange and stand to make significant money on the Archipelago deal, have also been upbeat in public comments, saying they believe the exchange will be able to better compete against electronic markets both domestically and globally.
David Humphreville, president of the Specialist Association, which represents NYSE trading firms, said members are "cautiously optimistic that this will be a very good transaction for the exchange, will help our global competitiveness and will strengthen the auction market."
Under terms of the transaction, the members will receive a total of $400 million in cash, or about $300,000 per seat, and a 70 percent equity stake in the new company, to be called NYSE Group Inc. The deal values the NYSE at about $3 billion, or about $2.2 million per seat. That represents a significant premium over the most recent sale price of $1.2 million for a seat.
NYSE members have complained for years about the declining value of their seats. After peaking in 1999 at $2.7 million, the value of a seat dropped as low as $975,000 this January as the exchange lost market share to electronic networks and continued to feel the aftereffects of scandals surrounding improper trading and the compensation of former chairman Grasso.
Now, members will be able to receive a premium for their seats and keep their trading privileges, if they so choose. The NYSE plans to lease trading licenses after the merger is completed, and current members will have the first crack at the licenses.
NYSE Chairman John A. Thain met with members Thursday afternoon to discuss the deal. Sources familiar with the meeting said it was friendly, with members expressing enthusiasm about the deal and inquiring only about details.
