ICE: NYSE Wants To Repopulate Exchange Floor

Some things never die, and the trading floors of the Chicago Mercantile Exchange and the NYSE are a great example of that. After electronic trading took hold and thousands of traders left the floor, most exchanges around the world had already shut their floors down. From the Bund pit in London to France’s Matif, they fell like dominoes.

ICE

When the Intercontinental-Exchange Group (ICE) showed up in Chicago trying to outbid the CME they caused a big stir.

I wrote a story back then that the CME would “never” let the CBOT fall into the ICE’s hands and that the Chicago exchanges must stay in Chicago. Had the ICE won I am sure they would have started shutting down the trading floors in Chicago the same way they did the New York Board of Trade and the London Petroleum Exchange.

But just as the industry is seeing some of the lowest trading volume in many years, ICE Chief Executive Jeffrey Sprecher said “You’re going to see the stock exchange itself, the floor-based portion, become bigger and nicer,” according to an article in Crains New York.

Mr. Sprecher told his company’s annual meeting last month. “We’re going to relocate people in that area to collaborate around trading.” Sprecher went on to say. “When you’re down there, there’s something quite special about it.”

World Leaders

The center of stock and futures trading in the US has alway been a rivalry between New York and Chicago. Trading floor tours and observation areas were never as busy as they are today.

Despite the downturn of the floor population the CME, housed in the landmark CBOT building on LaSalle Street, has been seeing record traffic and curious onlookers get a view of how electronic trading has decimated the trading floor.

Financial reporters still love to broadcast against the backdrop of the trading floors. A set like that is worth millions of dollars in income. So the idea of “repopulating” the trading floor does have value.

The New York Stock Exchange has symbolized global capitalism for over a century. A listing on the NYSE costs 5 times as much as Nasdaq. After all, the ticker tape parades that greeted generals and astronauts used tape from the NYSE.

“Talk to a businessman in Hong Kong or Shanghai, and they still think the New York Stock Exchange is a special place,” said Paul Bennett, a finance professor at Fordham University and former chief economist at the NYSE. “And the reason for that is the floor they see all the time on TV.”

However, the value of the trading floor is much more than cosmetic. I’ve often talked about the “feel” a trader gets from being on the floor, one you don’t get on a screen no matter how many indicators you have.

Now, neuroscientists confirm what traders have always known: the brain gets signals from the shifts in noise and energy on the floor, long before a trader is consciously aware of them. There’s an instinctive response, much like a batter swinging at a fastball or a boxer slipping a jab, that is both unconscious and the product of years of training.

No algorithm can match that human element. It is, as Jeffrey Sprecher put it, “something quite special.” Bringing back that human factor to the global exchange of value is something we should welcome.

Draghi is today’s focus

Markets rallied early this morning in response to the ECB meeting, where the central bank cut its deposit rate to minus 0.10 percent, making it the first to set a rate below zero.

It remains to be seen whether this will signal a larger program of quantitative easing. The market’s main focus today is on Mario Draghi’s press conference at 2:30 PM Central European Time.

The Asian markets closed modestly higher and Europe is trading modestly lower. Todays economic and earnings calendar starts with Chain Store Sales, Challenger Job-Cut Report, Gallup US Payroll to Populations, Jobless Claims, EIA Natural Gas Report, 3 and 10 Yr-Note Auction, 30 Yr Bond Announcement, Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on low real interest rates at Boston College, Fed Balance Sheet, Money Supply and earnings from Joy Global JOY, JM Smucker Company (NYSE: SJM), UTi Worldwide UTIW, and Thor Industries THO.

Our view

Our call to sell was wrong and we knew it right after the small selloff. There were the correct premium levels in the E-mini S&P ESM for arbitrage buy programs and with buy stops from 1922.70 to 1926.00, I knew the stops were dead meat.

After making a series of higher lows a buy program helped push the S&P futures to another all-time new contract high. Below is what was going on in real time in the trading room:

Chance_Stroot (09:45:25):dboy – we going up or down?
dboy (09:45:36): up
dboy (09:46:14): Chance they don’t look down thats for sure
Chance_Stroot (09:46:34): sure don’t
dboy (09:47:53): Buy stops; 1922.70 to 1926.00
dboy (10:04:34): E$ES_F NO STOPS GO UNTOUCHED IN THE S&P 500

If you do a time and sales you will see that not long after we put that up in the trading room the ESM14 was pressing into the buy stops and made an initial high of 1926.00.

As of 7:30 AM CT the E-mini reached a new high of 1934, a level we’ve been calling for over a month, with 1942 and 1946 above. Our view for today is to sell the early rallies and buy weakness. As always, please keep an eye on the 10-handle rule and please use stops when trading futures and options.

• In Asia, 7 of 11 markets closed higher: Shanghai Comp. +0.79%, Hang Seng -0.18%, Nikkei +0.08%.
• In Europe, 7 of 12 markets are trading lower: DAX -0.06%, FTSE -0.24%
• Morning headline: “S&P futures seen lower; Draghi to unveil new stimulus program”
• Fair value: S&P -1.46 , Nasdaq -0.67 , Dow -11.23
• Total volume: 917k ESM and 4.5k SPM traded
• Economic calendar: Chain Store Sales, Challenger Job-Cut Report, Gallup US Payroll to Populations, Jobless Claims, EIA Natural Gas Report, 3 and 10 Yr-Note Auction, 30 Yr Bond Announcement, Narayana Kocherlakota speaks, Fed Balance Sheet, Money Supply and earnings from Joy Global JOY, JM Smucker Company SJM, UTi Worldwide UTIW, and Thor Industries THO