Wall Street's wireless initiative at the New York Stock Exchange has been picking up speed and is quickly becoming a T+1 centerpiece. "They have totally eliminated paper except for some confirms," says Isabella Cagnazzo Fonseca, an analyst with Boston's Celent Communications. Lou Pastina, NYSE vice president, point of sale technology, says the paper reduction program will take a big step forward when the NYSE extends a wireless pilot program to cover more specialists some time early in the coming year. The initial phase reduced paper by 20 percent and he hopes to achieve 75 percent paper reduction with the next change.
"It's a key component of our T+1 program." In the "old world," he says "we used to send the depository records and they would compare them overnight and send us back the result of that comparison. Today, the stock exchange...compares things in real time and sends them to the depository for settlement," which turned a batch process into a real-time event. "In a T+1 world, that's the only way you can do it. You would like to get that information into the system as quickly as possible. The best place to do that is at the point of sale. The only way to do that at point of sale, if you're a broker, is through one of these e-devices."
The e-devices he talks about are handheld devices that floor traders use to conduct business. They're not the typical RIM or Palm devices. Rather, they're largely devices from Casio or Compaq's ipaq, which are programmed to run through the NYSE's wireless infrastructure-the Wireless Data System. (WDS). That effectively eliminates the popular RIM Blackberry, which runs on its own external network.
The NYSE offers e-Broker, a full service device that handles order management, execution and "looks," and e-Broker Lite, used for market looks and market data only.
But they're not the only player. In July, NYFIX, Inc., the Stamford, Conn. company that develops and markets electronic trading systems, rolled out its next-generation of wireless handheld computers for NYSE floor brokers.
Mobile Broker provides floor brokers with real-time trading capability directly from the "crowd," the area on the exchange floor surrounding the specialist posts where executions occur. By enabling brokers to electronically receive orders directly at the point of sale, Mobile Broker eliminates the need for them to travel back and forth to the firm's booth. The broker can enter execution information directly from the point of sale, simultaneously updating the booth, trader workstations and back-office systems in one simple step.
Andy Wilson, executive vice president of sales and marketing at NYFIX, says Mobile Broker is installed at 10 of the Street's larger firms, including Lehman Brothers, UBS Warburg, Bank of America and Morgan Stanley.
As well, some investment firms have opted to go it alone and have developed their own proprietary software and handheld devices, including Goldman Sachs, Smith Barney and Credit Suisse First Boston. That has led to "explosive" growth in the use of devices since the beginning of the year, says Pastina.
Overall, there are about 550 devices being used on the floor. Wilson says NYFIX has about 125 users, up from zero at the start of the year. "We're looking for that number to grow to at least 500," he says, adding that, "People are starting to use (wireless) more and more in their daily activities."
He says NYFIX's advantage is that it has taken the smaller Casio unit and programmed it to offer both looks and execution over its system. He says that if you want both options using the NYSE offering, then you need to go with the heavier Casio unit, which has a low battery life and high heat output.
With the growing number of users has come increased volume. Pastina says there are more than 30,000 messages a day, "twice as much as last year," and more than 50 million shares are executed daily through the e-Broker system alone. Part of the impetus for growth has been a change in trading rules which require firms to enter details of an order into an electronic system on the floor before being represented or executed.
On the product side, Pastina says "one of the most dramatic changes" is something called Open Book. "There we will be sharing with the general financial community limit orders on the specialists book." This will be available to the handheld device users. "The outside community for quite a while has wanted to see what's on the book, there's a lot of info there that's helpful for them in their trading strategies." It's scheduled to be available sometime this fall.
Celent's Cagnazzo Fonseca says the wireless initiative should be eye opening for investment firms about the potential for the deployment of handheld devices. "I think what they can learn is that these devices are not really going to replace humans, but are going to increase the speed and automate (processes). They are not going to take away jobs like a lot of people felt would happen."