What does that mean for Brokers and Buyers?
Stock brokers have been talking of a dying empire. After 213 years, the Wall Street stock exchange system will be changed forever in a reflection of our fast paced, highly technological times.
When most people think of Wall Street they think of the New York Stock Exchange with the omnipresent ticker trail, the “Big Board and hurried stock brokers throwing bits of paper around. Now when you hear “SOLD” a different meaning will come to mind.
The NYSE is making plans to be turned into a publicly-traded company and is being sold to Archipelago Holdings, Inc, an electronic trading company. Archipelago announced this merger agreement will create a new company called NYSE Group and will not be solely owned by NYSE seat holders.
The NYSE’s biggest competitor, National Association of Securities Dealers Automated Quotations commonly called NASDAQ is also in a bid to acquire Instinet, one of the country’s leading electronic communications trading networks and Archipelago’s biggest rival.
By buying Instinet, Nasdaq gains access to a more advanced style of electronic trading that has been favored by large institutional investors and that has cut into its trading volume. Both the Nasdaq and NYSE want to own electronic communications networks whose speed and inexpensiveness help them to keep an edge on smaller electronic competitors.
Nasdaq, private equity firm Silver Lake and The Bank of New York, are paying $1.9 billion in cash for Instinet. Instinet is roughly 62 percent owned by Reuters. NYSE has not yet disclosed specifically what the merger will mean to seat holders, but it is well known with the current unstable state of the stock market, many seat holders are concerned about losing values and deficit.
Other exchanges including the National Association of Securities Dealers or NASD and the American Stock Exchange or AMEX are both planning to cash in on the electronic advantage. Some advantages include faster service, less need for physical manpower and longer trading hours. This will have a benefit to stock buyers in that the price of buying stocks and funds will be an easier process and less expensive to buy.
For the thousands of stock brokers on Wall Street, changing to an electronic market may cost them their jobs. Many brokers with several thousand dollar annual salaries are afraid that they will lose their jobs in a year or two. The NYSE currently has 1366 members and under the merger with Archipelago, they will not need so many brokers on the floor. Many stock experts are expected to move into consulting and monitoring positions instead. While this change has yet to affect the job market, recent college graduates in the field of finance, may find themselves working on another street.
Robert Sealey, a sophomore finance major at Howard University said, “My ultimate goal is to be a stock broker, so with more exchanges becoming electronic, I may have to take more classes in electronic filing and media.”