Moneycontrol PRO
Contest Alert:2 days left to win Amazon vouchers worth Rs 5000. Take the MCPRO Quiz today to grab yours!
you are here: HomeNewsWorld

Will US exchange trading floors still be relevant post-coronavirus?

The NYSE, which is owned by Intercontinental Exchange Inc, closed its stock and options trading floors in New York and San Francisco in March 23 after traders and an ICE employee tested positive for the virus.

May 02, 2020 / 01:53 PM IST

The coronavirus pandemic has upended US equities trading with unprecedented market volatility and forced bourses like the New York Stock Exchange to close their trading floors, raising questions about the need for such spaces.

The NYSE, which is owned by Intercontinental Exchange Inc, closed its stock and options trading floors in New York and San Francisco in March 23 after traders and an ICE employee tested positive for the virus.

Rivals CME Group, Cboe Global Markets Inc and Nasdaq Inc also closed their options and futures pits in Chicago and Philadelphia.

Despite the move to all-electronic trading, none of the exchange operators experienced any major technical glitches amid record volumes, and all of them reported first-quarter profits that beat analysts' expectations.

Cboe aims to reopen its options trading floor on June 1 after acknowledging that some customers were frustrated by the exchange's electronic trading tools and were unable to get the most risky and complex types of orders completed, it said on Friday.

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

At the same time, Chief Executive Ed Tilly said Cboe will soon roll out new electronic solutions that will replicate benefits of the floor for those more complex orders, prompting analysts to question the need to reopen the spaces at all.

"Our position has always been that when our customers tell us that there's no utility in the trading crowd, when brokers provide no service to their customers, the electronic solution will close the trading floor, not Cboe and not its management team," Tilly said.

The NYSE is the only US exchange that still operates stock trading floors alongside electronic trading. It released a study on Thursday showing that floor traders dampen volatility by providing tighter bid-offer spreads, especially at the market close, saving investors millions of dollars a day.

While the floor distinguishes NYSE from its competitors, the closure has not led to a significant drop in market share, according to an analysis released Friday by industry trade group, the Securities Industry and Financial Markets Association.

"Only time will tell if investors feel the difference in execution of their trades with or without the human interaction on the floor," the study said.

The NYSE plans to reopen its San Francisco-based options floor on Monday. It has not given a date for the reopening of its iconic floors at 11 Wall Street.

CME, which runs the world's largest futures exchange, said on Wednesday it was unclear when it would reopen its trading floors, where about 10 percent of its business was done.

"We will not do anything irrational either way until we know exactly where health officials and government officials are going to come down as far as multiple people getting together in a single location," CEO Terry Duffy told analysts on a call.

The closure had little effect on trading activity, CME said.

"Participants can trade any strategy today as easily as they could prior to the closure of the floor," said Sean Tully, a senior managing director at the exchange.
Reuters
first published: May 2, 2020 01:45 pm

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark