NYSE Opens New Blue Room; Expands Floor Trading By 23%

The New York Stock Exchange's expanded floor trading facility, known as the blue room, is being positioned as part of the solution to problems faced by the exchange during its first 600 million share day.

The room was officially introduced to the press last week by Richard Grasso, executive vice president, capital markets at the NYSE. The facility expands floor trading space by 23 percent, houses eleven specialist firms, and will handle trading in 339 listed stocks.

But those hoping to see a quick techno-fix for the exchange's Black Monday woes were disappointed by the blue room's so-called "leading edge technology."

As currently implemented, the new hardware in the room offers improvements in size, convenience, and heat generation, but doesn't reflect substantial changes in either floor trading patterns or order processing systems.

Grasso admits that the technology on the new floor wouldn't have made any difference during the crash,"in terms of actual processing of orders or the execution process." He also concedes that "the trading process at the point of sale will be the same as in the other three facilities."

The Big Board spokesperson occupied a narrow and unglamorous spit of turf, unable to claim substantial improvement in trading processes for fear of alienating the rest of the floor, and unable to provide any good news about the exchange's most egregious technological failing, which occurred far upstream.

"The point of the new room," says Grasso, "is that we have fanned out roughly 15 percent of the stocks and that, by itself, will improve efficiency." The exchange has built a bigger barn, but they're still milking cows by hand.

Meanwhile, litigation is expected to erupt over the contract to supply a new, advanced telephone system to the entire exchange floor, including the blue room.

The expansion is currently equipped with an interim telephone system slated for replacement in about six months. V Band Inc. supplied the interim VK 6000 system and has been subcontracted by prime contractor AT&T to supply the final VIAX version to approximately 1,700 positions for $5.5 million.

But the original subcontractor for the exchange phone system was rejected. According to one source at the exchange, Financial Trading Technologies Ltd. (FTT) supplied a system that simply didn't work. "The lawyers would tell me to just walk away," says Joel Beier, NYSE vice president, technical services, when asked about FTT's role.

FTT principal (and former Micrognosis Chairman) Douglas Timms says, "I'm sure my legal counsel would advise me not to comment," but allowed as how it was an FTT turret that enabled AT&T to stay in the bidding for the NYSE telephone contract.

V Band didn't respond to the relevant RFP from the NYSE, according to V Band director of advertising Tom Davis. FTT's Timms says that, "V Band didn't have a product which met the NYSE's specifications at the time."

As previously reported (TST, August 17), the blue room is designed and equipped to support trading of options on listed equities side by side with the underlying issues. Several of the flat panel price displays are presently "unassigned." They would be used for options prices if side-by-side trading is approved.

By moving several specialist posts into the new facility, the exchange gives itself the elbow room necessary to install and maintain options trading facilities on the rest of the floor. Otherwise, the exchange's obsession with miniaturization cannot be explained by the status quo.