The Great Ganesha

With the merger of the NYSE with Archipelago, there’s talk that the specialists will now be eliminated as far as trading of ETFs (or Exchange Traded Funds) are concerned.

If you know anything about finance and trading on the NYSE, then you know that the “specialists” are those traders who match buyers with sellers on the trading floor. They also have (somewhat) of a say in what the bid and ask prices are. In fact, some years ago a bunch of financial economists discovered that some market makers (what specialists are called on the NASDAQ exchange) were setting the ask prices only in even-eights (that is, 2/8, 4/8, etc.) to boost their own profits on the trades.

So perhaps reducing the hold of these specialists is a good thing. Then again, if this is a signal of things to come, and if, at some point in the future, specialists are eliminated entirely, then with their departure will go a centuries-old tradition on the exchange floor.

Technology has radically altered the way financial instruments are priced and traded. Both in terms of the ease of computational efficiency with faster processors as well as the ease of trading over the internet. A lot of things are going to change drastically in the next decade as far as the exchanges are concerned.

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