Special episode: a trip to the NYSE trading floor

This is an audio transcript of the FT News Briefing podcast episode: A trip to the NYSE trading floor

Marc Filippino
Good morning from the Financial Times. Today is Friday, October 29th, and this is your FT News Briefing.

[MUSIC PLAYING]

Today, we’re gonna take you to the New York Stock Exchange to meet some of the people who run the place and talk about why humans still work on the trading floor. But first, we’ll tell you about Facebook’s new name. And speaking of new names, what is Floki Inu?

Katie Martin
So some enterprising young souls have created a crypto coin called Floki Inu purely on the back of the fact that there was a puppy called Floki.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

Facebook is changing its name. The social media company will now be known as Meta. Facebook’s chief executive, Mark Zuckerberg, said that the name Facebook doesn’t encompass everything the company does. Here’s the FT’s Hannah Murphy.

Hannah Murphy
This reflects a company’s push to build what’s known as the metaverse, which is the idea of a sort of virtual shared world where we can interact as avatars. So we’ll all have our own avatar that represents ourselves and in this world we’ll go, we’ll interact, socialise. We may work, buy things, you can go to concerts. This builds on something that’s been around for a while. We have gaming companies exploring these sorts of spaces. But Facebook is setting out to be the metaverse company. It’s actually part of a bit of a bigger battle with other companies in Silicon Valley, such as Google and Apple, who are also trying to build augmented reality. The idea that we’ll all walk around wearing smart glasses. And so Zuckerberg’s really strongly positioning Facebook to be a winner in this future operating system world.

Marc Filippino
Hannah Murphy is the FT’s tech reporter.

[MUSIC PLAYING]

Okay, so bond investors are anticipating that central banks will raise rates to fight inflation, which, you know, will slow economies. So they’ve been selling off shorter-term government debt. This week, two- and three-year US Treasuries fell in price and their yields rose to their highest point since March of 2020. The Federal Reserve has been relatively open about what it might do with rates, but the European Central Bank, which met yesterday, is a bit slower in signalling its plans. Katie Martin is with me to talk about this. She’s our markets editor. Hi, Katie.

Katie Martin
Hey, how you doing?

Marc Filippino
Doing well. Katie, there seems to be this kind of dance between the ECB and investors. You know, what’s going on here?

Katie Martin
Yeah. The European Central Bank has warned that the market is having a particularly difficult time reading at the moment. At its latest meeting, it said it will keep its bond-buying programme basically running still at a high pace, even though inflation is kicking up. It does intend to trim these asset purchase programmes, but what has happened is that the bond market has kind of got slightly ahead of things, and it started to bet that the European Central Bank might start to raise rates relatively quickly. ECB president Christine Lagarde was saying, you know, it’s effectively not really my job to tell you whether the market is right or wrong or to guide the market, you know, my job is to be ECB president. And so that has just set off a whole new set of volatility that’s really taken people by surprise.

Marc Filippino
So Katie, moving from central banks to something completely different and really decentralised. Let’s talk about Floki Inu in this crazy advertising campaign going on in London’s underground.

Katie Martin
Yeah.

Marc Filippino
To be honest with you, I don’t really know what Floki Inu is. [laughs] Can you walk me through it?

Katie Martin
So, Elon Musk got a puppy. So some enterprising young souls have created a crypto coin called “Floki Inu” purely on the back of the fact that there is a puppy called Floki. And the reason we’re writing about this now is that all of a sudden a huge rush of adverts for Floki have sprung up on the, on London’s transport network. So you know, you get on the Tube, you get on a bus, wherever you go, there are lots of adverts kicking around saying, “Missed Doge? Get Floki.” And one of the things that’s interesting about this Floki initiative is that anyone who buys Floki, the promoters impose a four per cent levy that goes into helping to promote more people to buy Floki. So it’s about getting influencers on board, and it’s about keeping up this marketing campaign and keep new money coming in and the way the adverts are presented and, you know, some of the kind of buzz around it is pretty alien to the normally very staid and sensible industry around advertising financial products. But there appears to be nothing to stop Floki from putting these ads on the Tube. It’s not something that’s revenue-generating. It’s not like buying a stock. It’s difficult to figure out who’s actually running it or the people who are involved seem to use aliases rather than their own names. So it does raise some pretty interesting questions around consumer protection and around what kind of ads regulators might decide that they’re comfortable with.

Marc Filippino
Katie Martin is the FT’s markets editor. Thanks, Katie.

Katie Martin
No problem.

[MUSIC PLAYING]

Marc Filippino
So we’re at the end of the trading week, and for a lot of people, the trading week evokes images of people buying and selling stocks on a busy trading floor. But in reality, almost all exchanges in the world today are electronic. The New York Stock Exchange is one of the last that still has open outcry human traders and what are called designated market makers. But they’re not just a relic. Humans do add value, and oddly enough, the pandemic created an opportunity to measure how much value humans had. So right now, we’re going to go to the New York Stock Exchange or the Big Board, as it’s called, for an audio journey reported and produced by the FT’s Oluwakemi Aladesuyi.

Jay Woods
Well, we’re in the greatest building in the world, but obviously I’m biased, being here for 29 years. My name is Jay Woods. I work at the New York Stock Exchange for DriveWealth. This used to be the loudest place in the world, very vocal, filled with three to five thousand people running around like maniacs between the bells at 9:30 and four o’clock every single day.

Michael Mackenzie
I’m Michael Mackenzie, I’m the US investment editor. I’ve seen the floor change from what was a bustling place to becoming more like a museum. I wrote about Starbucks opening up a branch on the floor, which upset a couple of traders.

Marc Filippino
There are still humans here, just a few hundred, much fewer than before, but they still play a crucial role. And Stacey Cunningham explains why.

Stacey Cunningham
I’m Stacey Cunningham, president of New York Stock Exchange. Every stock that’s listed on the New York Stock Exchange has a market maker who is responsible for overseeing trading in that stock. There’s a human being who is applying human judgment, much like the pilot behind the controls of a plane, that is, the plane can fly itself, but the pilot is actually there looking for periods of turbulence, reacting, take-off and landing.

Michael Mackenzie
Designated market makers looking at where do I quote my opening price for a listed stock? And so everyone’s focused on what’s happening before the official open at 9:30. In that role, the designated market maker is helping facilitate price discovery at the beginning of the session.

Phyllis Arena Woods
My name is Phyllis Arena Woods. I’m a trader on the New York Stock Exchange. The bidding offer has to be within a certain percentage. Like if it’s, you know, $24 to $24.10. If there’s no bids, he has to step in and tighten up that market. He has to. It’s a regulatory thing. He has to, which is not fair. You can’t have a wild swing like that. And that’s what you see in the stocks like Google, Amazon, it moves like crazy. There’s no human intervention.

Jay Woods
As a trader, you wanna know exactly who you’re up against and how you have to handle certain orders. We had a motto. Our word was our bond.

Stacey Cunningham
You know, we know stocks trade better on the New York Stock Exchange than other fully electronic exchanges. But we didn’t know how much of it comes from the accountability or the human element.

[NEWS AUDIO CLIP: From Monday the 23rd, the New York Stock Exchange has decided to close the trading floor, but . . . .]

Marc Filippino
Now the New York Stock Exchange had closed down before, after the 9/11 terrorist attacks, for example. But this time, when it closed its physical doors because of the pandemic, it kept operating for the first time ever, fully electronically.

Stacey Cunningham
We saw that it did cost investors money to have the floor closed. There are actually some academic studies that showed the value of the trading floor, which we could never measure before because we had never operated in the market with the trading floor closed.

Jonathan Brogaard
My name is Jonathan Brogaard. I am a professor of finance at the University of Utah’s David Eccles School of Business. What we document in our paper is that during the floor closure, the liquidity of financial markets decreased the cost to buy and sell stocks on the NYSE rose from, on average, about 18 basis points all the way to 27 basis points, so a 50 per cent increase. There was more pricing errors, and prices were less reflective of the true underlying value. During times of complex situations, humans and human expertise can be a complement to the machines.

Phyllis Arena Woods
This is a test. It was. The DMM is still very crucial to the point of sale because you have to create a proper liquidity event. That’s why the exchange loves the human element here. It’s part of their model. I don’t believe they’ll ever get rid of it. They’re saying they’re not gonna get rid of it.

Marc Filippino
So if humans add value and create a better market for investors, why don’t other exchanges have humans? Bottom line: it’s expensive. Like Mackenzie says replacing humans with technology is cheaper and can boost productivity.

Michael Mackenzie
But I think the New York Stock Exchange, I think they’ll try to keep it for as long as it is used. For one, at the moment, I think it serves a purpose. When a company wants to list its shares, they’ve got two choices: they can go to Nasdaq or they can go to NYSE. NYSE says, hey, I’ve got a floor, you know, stand on the balcony, listen to the prices being closed up. You know, it’s a branding. It’s pure branding, and you can get a nice cup of Starbucks while you wait.

[MUSIC PLAYING]

Marc Filippino
This audio journey was reported and produced by Oluwakemi Aladesuyi. It was engineered by Breen Turner and it was edited by Jess Smith. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Peter Barber, Gavin Kallmann and Michael Bruning. The global head of audio is Cheryl Brumley, and our theme song is by Metaphor Music.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.