by Michael Higgins, CEO of Velox Clearing
As the words “NYSE TRADING FLOOR TO OPEN TOMORROW” scroll across the television monitor in his living room, Sal Suarino, who is a broker for Mark J Muller Inc. located on the floor of the NYSE, is focused on the task at hand, ignoring the content on the screen – ironing his khakis for the day ahead, as he always has daily for the past decade. The prospects of returning to the New York Stock Exchange floor is more than exciting to Sal – it is a much-anticipated relief.
A STORM IS COMING: THE PANDEMIC SURGES
Locked-out from his trading terminals, self-quarantined at home, and off the trading floor were the only realities this NYSE floor broker knew amidst the swell of the coronavirus pandemic in New York City. Governor Cuomo, along with NYSE leadership, understood the severity that COVID-19 posed against the heart of the financial community within Wall Street.
Expediting the decision to close the floor became more obvious when a trader reportedly tested positive for coronavirus on March 18th. In response, the NYSE temporarily suspended activity on the trading floor and moved to fully electronic trading. “The decision to temporarily close the trading floors represents a precautionary step to protect the health and well-being of employees and the floor community in response to COVID-19,” the exchange announced.
SEEKING SHELTER: FLEEING THE EXCHANGE FLOOR
At the outbreak of the virus, Sal and the members of Muller Equities anticipated changes on the trading floor, “Once we were approaching the spread of the outbreak, they started testing us prior coming into the building to determine any risk whatsoever, providing thermometers and [consulting] us with doctors and nurses. If anyone had a higher temperature than normal, they would be restricted from coming on to the floor.”
The media soon erupted with photos of floor traders and brokers disassembling their trading desks. The stay-at-home orders forced this community to gather their equipment in order to use them remotely. “As we approached the stock exchange floor shut down date, it became more restricted to protect individuals. Once the floor was abandoned the volatility increased, and then clients realized how useful we were in providing depth of liquidity in the marketplace. Our clients began asking us when we would return to the floor. So something that was taken as a given, such as the floor brokers and the stock exchange floor, was now found to be a very useful tool. I guess absence makes the heart grow fonder!”
It hasn’t been all that bad though, considering the unique positioning these firms have with their clients. “We’re a unique entity on the floor of the stock exchange since we’re the only human-interaction stock exchange on the planet that acts as a hybrid entity dealing in equities,” says Sal. “The stock exchange leadership has done a very good job in giving us the technical and interactive abilities to compete [in the marketplace]. As volatility increased, we were getting more business from people who recognized the advantages of being on the trading floor.”
BRAVING NEW WATERS: TRADING REMOTELY
After the evacuation of floor brokers and Designated Market Makers, the NYSE was forced to embrace an all-electronic trading system. This proved to be a challenge for the firms that relied on being center-stage on the exchange floor, as their process involved being physically on the floor with other brokers. “The only thing that we can possibly do, as far as trading remotely is concerned, is trade rebalance on the opening/closings,” says Sal, who noted that uncertainty filled the air between brokers who were mandated to leave the floor. “Leadership did the right thing at the right time to shut it down – there were very few reports of people contracting the virus out of the 400+ people on the trading floor, so leadership did a great job on that.”
Highlighting the challenges of being off the floor, Sal explained why the virus has hurt the trading community. “Trading remotely is difficult for 90% of the firms down there – it’s risky and difficult to manage while being in containment. We decided as a firm that we weren’t going to trade remotely, so we shut down completely with virtually no revenue coming in, but we felt that this would be the most risk averse approach.”
An event like this has not rocked Wall Street in a long time. Sal believes NYSE leadership was vigilant in their approach to the pandemic and their efforts to sustain the health and integrity of the exchange floor and its members.
“The [NYSE] had to coordinate with the New York City government as far as when it would be safe to reopen,” explains Sal. “The decision making was on them, but it had to fall in line with the context of what the city wanted. When we reopened, they didn’t want anyone on the trading floor that took public transportation – obviously, that curtails a lot of people in the moment.”
THE CALM AFTER THE STORM: RETURNING TO THE NYSE
It’s been over 2 months since the closure of the stock exchange trading floor, and most floor brokers have been eager to get back to do their job. “We’ve seen during this time that our experience and talents have been more appreciated now that we’re gone – that’s something that we’ve enjoyed hearing, and it’s very humbling,” says Sal.
This optimism is further reinforced by the attention to detail given by the NYSE leadership, who acknowledge the wellbeing of those on the floor. “Leadership at the NYSE is going to be extremely cautious when they bring us back. They’re going to monitor the data collected prior to walking onto the trading floor, such as the stats from social distancing and the actual lack of interaction, to see if [the virus] still exists and determine if we did follow all of the protocols in order to get more people back on the floor. We already have a unique ability to space out and have a lack of interaction, with no food on the floor – there’s going to be very little [interaction] other than people staying in their space, staring at their computers, and interacting with the clients – that’s all that’s going to be done very early on.”
Looking forward, traders like Sal are keen to work with their clients again in a challenging yet rewarding environment that they feel the most comfortable. “It’s simple – when we’re on the floor constantly and always available, the tendency [for investors] is to say ‘Well, that’s something that’s always available to me.’” says Sal. “Because that’s the only place you can go to when you actually need to talk to a person and get interaction on what’s going on with a stock. Clients are very much appreciative of being able to interact with someone on the phone again and have an actual human trading their stocks.”
Regardless of the current technologies available to traders and other players in this space, there is no experience that can compare to talking to someone over the phone who has their two feet on the exchange floor.
Sal is fully prepared to walk back onto the exchange floor and be “socially-distanced” near his trading community, performing the same dutiful responsibilities he had before the outbreak. “I’m hopeful and assured that we’re going to be welcomed back, based on the calls I had with our clients,” says Sal. “I’m really happy to hear that too because I’m not ready to go home yet.”