The New York Board of Trade, an open-outcry-driven commodities exchange, plans to launch a wireless handheld project next week. The handheld PCs, targeted at NYBOT pit brokers, will display real-time bids and offers from the exchange's order book management system (OBMS). Pit brokers using the handhelds will be able receive and execute orders sent to them via the NYBOT's Electronic Order Routing (EOR) system -- a recently-deployed order-delivery platform that is currently being used by a dozen brokers operating outside of the exchange.
The NYBOT actually began to pilot its handhelds prior to September 11 of last year, but had to put the project on hold after the 9/11 attacks destroyed its 4 World Trade Center headquarters and forced the exchange to relocate to its Long Island City-based back-up trading facility. The handhelds will be installed in the trading rings the NYBOT has set up in Long Island City -- which will serve as the exchange's primary trading site until it relocates to its permanent headquarters, in the New York Mercantile Exchange's downtown Manhattan office, in the first quarter of 2003.
Pat Gambaro, senior executive vice president and interim chief operating officer of the NYBOT, says that pit brokers who use the handhelds will be able to see all of their clients bids and offers without having to handle any paper. The NYBOT's OBMS, he explains, will be integrated into the handhelds, enabling brokers to electronically see full bid/ask data, from inside the ring, in real-time. The handhelds will also enable pit brokers to provide speedier fills to their clients. "You'll have instantaneous information (routed) back to the client, as soon as the execution is put into (a broker's) handheld," says Gambaro.
Since they will be electronically linked to the exchange's back office, the handhelds will also eliminate the need for brokers to manually key in trade execution data. "A (handheld) order will be electronically routed to the exchange's back office, for instantaneous processing and matching with the opposing sides," says Gambaro. "So (brokers) using handhelds will have real-time audit trails, which the CFTC loves."
NYBOT members that choose to route orders directly to handheld-equipped pit brokers, via the exchange's EOR system, will be able to bypass manual steps in their trading process. Currently, a remote member of the exchange can use the EOR to send an order to a broker's booth on the floor of the NYBOT -- in lieu of phoning an order in to a broker. The EOR gets sent to a PC and a printer located at the booth, and a booth clerk then prints out the order and runs it into a trading ring.
But next week, users of the EOR will be able to bypass the booth by sending orders directly to handheld-equipped pit brokers. To date, only two brokers have signed up to use the handhelds, but that number should increase after other brokers see the benefits the wireless devices provide, says NYBOT Chief Information Officer Steve Bass. "You have got to remember, when you are dealing with human beings in this kind of environment, change is an enigma. They really don't like to change the way they do things," he says. "But we believe that a broker that (uses) one of these (handhelds) will provide real advantages to his customers."
Once the benefits of the handhelds become clear to other floor participants, Bass says, use of the wireless technology should rise. The NYBOT, says Gambaro, also expects the number of brokers using its EOR system to increase significantly. By year-end, he says, the NYBOT would like to have around 50 brokers signed up for EOR.
The EOR, says Gambaro, is helping the NYBOT compete with all-electronic rivals -- such as the London International Financial Futures and Options Exchange -- by providing brokers with a platform that provides "straight-through processing and electronic audit trails." However, he says that the exchange has no intention to mandate the use of EOR, because the system will never be able to completely replace phone-based trading. "The phone will never go away, because the customers in a commodities environment, especially in New York ... like the ability to conference the floor -- to get research opinions instantaneously," says Gambaro.