The New York Stock Exchange’s leadership proved the Big Board’s irrelevance Wednesday as it halted trading for nearly four hours and investors didn’t flinch.
Since its inception in 1792, when its headquarters were at the storied Tontine Coffee House at the northwest corner of Wall and Water streets, then in 1865, when it moved to 11 Wall St., it has played a central role in American economic development.
The NYSE has made Americans proud, standing tall even in the face of terrorism on 9/11.
Today, the NYSE has morphed into a TV studio and a historical museum. Still, there are few places on Earth more patriotic than the exchange.
The people on the floor — the few who remain — are a special breed of New Yorker, financier and American.
But on Wednesday, the NYSE management embarrassed its floor traders and the country, weakened the already depleted public confidence in markets and cost itself millions in commissions — all supposedly because of a software update gone wrong.
It also taught its customers that it has become largely irrelevant to market trading — the markets functioned just fine without it.
On a typical day, NYSE stocks trade approximately 1.7 billion shares on a composite basis of all exchanges.
On Wednesday, the composite of exchanges traded approximately 1.7 billion shares.
The difference was, when you’re closed from 11:32 a.m. to 3:10 p.m., you miss out on your share of the volume and the fees.
Wednesday’s debacle was not about the reduced volumes of the day, but about the future.
Since market trading is a zero-sum game, look no further than the other, 100 percent electronic-based exchanges, which is where the volume went.
Because of those electronic exchanges, the NYSE has only about 16 percent of the trading volume in its own exchange-listed names.
On Wednesday, the NYSE traded just 5 percent of the volume in its own listed names, which by way of calculating indices, threw off many computations for returns using NYSE-listed stocks.
Perhaps it’s best — and it pains me to say this — if the NYSE remains a TV studio and a museum to harken back to when it was a great symbol of America and let the trading go to the better prepared.
Lights, camera, action, trade.