The future of the New York Stock Exchange

Yahoo Finance Editor-in-Chief Andy Serwer discusses the future of the New York Stock Exchange as the city and rest of the country begin to reopen.

Video Transcript

- Over the weekend, Yahoo Finance Editor in Chief Andy Serwer wrote about the future of the New York Stock Exchange, an institution that has been undergoing change now for several decades. Had to shut down during the pandemic, opened at 25%, is now back at 50% capacity. But Andy, as you know, the scene on the floor, even at 100% capacity, were it to be at 100% capacity, vastly different in 2021 than it would have been in '91.

And you wrote a lot about what the future of the floor looks like within the modern market. Let's just start with what your takeaway is and where you think the exchange heads. You know, that main backdrop that we all get our pictures from, and CNBC, and we were broadcasting down there earlier. Where does the floor go from here after the pandemic?

ANDY SERWER: Yeah, it's a real dilemma, Miles. And it's such an iconic part of American history, and American present, and we hope America's future as well. And this has to do with the epicenter of American capitalism, as it's sometimes known. And I don't think that's really an exaggeration to some degree. But the problem is that so much trading is now done electronically without human beings.

And that's been the case, as you suggested, for quite some time now. And inexorably, it's moving that way. And the issue here, you guys, is that during this complete shutdown of the floor where trading continued, which is the only time, the first time, that's happened. The Exchange has closed before, say during 9/11 or Hurricane Sandy. But then trading ceased.

This time, the floor was closed, but trading continued. It demonstrated that in fact, the Exchange could go on without human beings. And, you know, that's a tough reality. And you've got this incredible scene down there, which makes for great pictures. And yes, you can have dozens and dozens of people down there. And they are working. But in a way, they're not really a part of the future of stock trading say five, 10, 20 years from now. And you have to wonder, well, what's the Exchange going to do about that?

- Andy, it's still-- it's amazing to me to even think about the floor not being open. But where-- if there is no floor, and they're not going to be in the New York Stock Exchange, where would they go? I mean, do they move to another state?

ANDY SERWER: Yeah, well there's that whole-- that's kind of a tax issue, also, Brian. Because Stacey Cunningham wrote an op-ed piece in The Wall Street Journal a couple of months ago when it looked like there was going to be a new financial transaction tax saying, well, we could move anywhere. Which is sort of a piece with this notion of the floor. So in other words, if they don't have to be there, they could be anywhere. But, you know, the Exchange has incredible value, the floor does for the Exchange I should say in terms of companies wanting to go there and ringing the opening bell.

You know, it is a differentiating factor when it comes to competing with the NASDAQ, which paradoxically you guys have said-- pooh-poohed the in-person trading while at the same time building up this in-person experience at the market site in Times Square. So in a way, the NASDAQ's sort of copying what the NYSE is doing, while at the same time the NYSE has been copying what the NASDAQ has been doing.

- I mean you have to wonder, Andy, if at some point-- they still have an enormous amount of real-- that's a big building. It's actually, right, two addresses, as you point out in your column. You could envision-- and they've already shrunk the floor considerably. It was-- at its height I believe it was three rooms, and now it's down to one room. And as we know, diminished capacity in that one room.

You have to wonder if at some point they'll just shrink it even more. Still keep the sort of historical significance. Still keep the marketing. Still keep the various-- you know, I mean, parts of the place are a museum, effectively. They have various memorabilia. Keep that. But maybe cut the expense down to some extent.

ANDY SERWER: Yeah. But you know, there are still some functioning aspects of the human trading at the open and at the close. They say complex trades still can be better facilitated by human beings. But, you know, it's sort of a little bit going through the motions. And again, you know, they did without it for two months. But it would be hard to really sort of envision that, though, [? Julie. ?]

And I'm wrestling with this myself. So would it still have the same cachet? Would it still have the same meaning if there really wasn't anything going on there? Now, I spoke with the COO of the NYSE, or we did, Max [INAUDIBLE] did, actually, about some future plans. And he hinted that there are some plans afoot to actually add more value in terms of the human and technological facets working together to make that part of the trading experience more valuable for customers.

So we're going to have to see over the next couple of months what the NYSE does. But it is a big, honking beast as you say down there, [? Julie. ?] And they're going to have to figure this one out.

- Andy, what if it just goes away? Like, what's-- who cares? I mean, I'm sort of asking rhetorically here to play devil's advocate. But, like, what if it just goes all electronic forever? What difference does it make in the grand scheme of things?

ANDY SERWER: Probably not that much. I mean, this one source I talked to said that the difference with the human element is microscopic at this point. And you have to wonder about in the future. I mean, you know, it's sort of like our business. We don't need humans to oversee the algorithms though. Well, maybe we do. So I think there'll always be a human element, or there should be.

And the NASDAQ obviously has all kinds of humans overseeing trading, but not necessarily the floor brokers, and the specialists, and those people. It could go away. And I think probably-- I mean, you know, ask yourself 50 years from now. I mean, are there going to be people there? I kind of doubt it. I mean-- and it would just be a museum kind of thing. But maybe it wouldn't even be that. You're right. I mean, it's sort of like [INAUDIBLE] is in the long run kind of thing, right, you guys?

- Well, you know, Andy, my thought on this is as our employer, perhaps, and others look for more flexible work arrangements, want to spread people out, I think there should be more media on the floor of the exchange. There's certainly the room for it. So maybe we set up a, you know, more robust Yahoo Finance outpost down there. Spread us out and keep kind of the gears turning that way.

I mean, it's a way to cover business. You cover business from the floor. And even if it's just a backdrop, I think it still has a little [INAUDIBLE]. That's just me. That's just me.

ANDY SERWER: Yeah, I agree with you. And we will watch this unfold, no doubt.

- There you go. Watch this space, as they say. All right, Yahoo Finance Editor in Chief, Andy Serwer. Appreciate you jumping on this morning.