1 00:00:07,600 --> 00:00:10,760 Speaker 1: Welcome to Odd Lots. I'm Tracy Alloway, Executive editor of 2 00:00:10,760 --> 00:00:15,720 Speaker 1: Bloomberg Markets, and I'm sorry. I think I'm sorry. Maybe 3 00:00:15,760 --> 00:00:18,480 Speaker 1: I'm happy. I'm happy to tell you that Joe isn't 4 00:00:18,560 --> 00:00:21,840 Speaker 1: here with me today because he's having his first baby 5 00:00:21,920 --> 00:00:24,560 Speaker 1: and he's on paternity leave. So we wish him the 6 00:00:24,560 --> 00:00:26,560 Speaker 1: best of luck with that, and we look forward to 7 00:00:26,640 --> 00:00:31,400 Speaker 1: many Odd Lots podcasts about the market for baby milk, 8 00:00:31,520 --> 00:00:34,640 Speaker 1: formula or diapers. I don't know, it's probably not markets 9 00:00:34,680 --> 00:00:38,040 Speaker 1: in those uh. In the meantime, though, I am joined 10 00:00:38,040 --> 00:00:40,959 Speaker 1: by a new co host today. It's Pim Fox. He 11 00:00:41,159 --> 00:00:44,680 Speaker 1: has his own radio show on Bloomberg Radio called Taking Stock. 12 00:00:44,840 --> 00:00:48,120 Speaker 1: Say Hi Pim, Hello, Hi Tracy, Thanks so much for 13 00:00:48,159 --> 00:00:51,240 Speaker 1: being here today. You are actually the perfect co host 14 00:00:51,320 --> 00:00:53,600 Speaker 1: for the subject matter because we are going to be 15 00:00:53,680 --> 00:00:57,800 Speaker 1: talking about big, big changes in the stock market. Right. See. 16 00:00:57,800 --> 00:00:59,200 Speaker 1: I thought you were going to tell me I was 17 00:00:59,240 --> 00:01:02,440 Speaker 1: perfect because I was old. Because we know we talk 18 00:01:02,520 --> 00:01:06,160 Speaker 1: about stock markets. Of course, stock markets used to work 19 00:01:06,200 --> 00:01:10,319 Speaker 1: a lot differently, even just ten fifteen years ago, never 20 00:01:10,440 --> 00:01:13,080 Speaker 1: mind fifty years ago. And you have to remember that. 21 00:01:13,080 --> 00:01:14,720 Speaker 1: You know, it's an institution, so a lot of people 22 00:01:14,760 --> 00:01:17,959 Speaker 1: have that institutional memory. That's right, him, I was trying 23 00:01:18,000 --> 00:01:20,800 Speaker 1: to avoid calling you old you. You went ahead and 24 00:01:21,319 --> 00:01:24,080 Speaker 1: went there. We're going to be talking about a specific 25 00:01:24,280 --> 00:01:27,080 Speaker 1: type of trading today. We were talking about floor trading. 26 00:01:27,400 --> 00:01:31,240 Speaker 1: We've seen this big debate about computerized high frequency trading, 27 00:01:31,360 --> 00:01:34,320 Speaker 1: the changing nature of the stock market. Him. I know 28 00:01:34,400 --> 00:01:36,399 Speaker 1: you've been talking about this a lot. Yeah, well, of 29 00:01:36,440 --> 00:01:39,959 Speaker 1: course it's a very popular topic, you know, h FT, 30 00:01:40,440 --> 00:01:43,759 Speaker 1: high frequency trading, whether they add liquidity, whether they're really 31 00:01:43,800 --> 00:01:45,520 Speaker 1: in it. But you know, one of the things I 32 00:01:45,560 --> 00:01:48,040 Speaker 1: think is useful just to keep in mind is kind 33 00:01:48,080 --> 00:01:52,120 Speaker 1: of what purpose, what role does a floor trader or 34 00:01:52,320 --> 00:01:55,600 Speaker 1: just let's say trader actually play. They are in the 35 00:01:55,640 --> 00:01:58,680 Speaker 1: middle of a transaction, and we know that they've been 36 00:01:58,760 --> 00:02:01,080 Speaker 1: sort of oh they're the bookieyman. You know, they're the 37 00:02:01,320 --> 00:02:03,480 Speaker 1: terrible things in the world. Middleman, let's get rid of 38 00:02:03,520 --> 00:02:07,400 Speaker 1: them and cost less we get but middlemen. I believe 39 00:02:07,480 --> 00:02:11,360 Speaker 1: they serve a purpose and they have historically served the purpose. 40 00:02:11,680 --> 00:02:14,079 Speaker 1: And to what We're gonna learn a lot about it today. Yeah, 41 00:02:14,120 --> 00:02:16,280 Speaker 1: And on that note, we are going to roll a 42 00:02:16,320 --> 00:02:18,799 Speaker 1: little clip for our listeners right now and they can 43 00:02:18,880 --> 00:02:21,800 Speaker 1: learn more about what a floor trader actually does. Starting 44 00:02:21,800 --> 00:02:24,399 Speaker 1: with a quick rundown on the men who transact your 45 00:02:24,480 --> 00:02:29,960 Speaker 1: everyday business on the floor. These member floor brokers, for instance, 46 00:02:30,280 --> 00:02:33,760 Speaker 1: who are usually partners in the member firms trading for 47 00:02:33,800 --> 00:02:35,880 Speaker 1: you at the post where the stock you want to 48 00:02:35,919 --> 00:02:39,920 Speaker 1: buy or sell is a sign. The specialist whom you 49 00:02:39,960 --> 00:02:42,800 Speaker 1: can pick out because he frequently refers to this book, 50 00:02:43,280 --> 00:02:46,320 Speaker 1: and the broker's clerk whose telephone links the floor through 51 00:02:46,320 --> 00:02:49,640 Speaker 1: the order room to the man you know best, your 52 00:02:49,639 --> 00:02:53,840 Speaker 1: own broker, because you and he are both professionals. Your 53 00:02:53,919 --> 00:02:56,120 Speaker 1: member broker can help you make the best use of 54 00:02:56,160 --> 00:03:00,519 Speaker 1: the market in carrying out your investment decisions. Suppose you 55 00:03:00,600 --> 00:03:03,680 Speaker 1: had an order of moderate size. It could be handled 56 00:03:03,720 --> 00:03:06,359 Speaker 1: all at once or in a flow in, flow out, 57 00:03:06,360 --> 00:03:09,079 Speaker 1: a series of transaction. Him, what do you think of that? 58 00:03:10,160 --> 00:03:15,040 Speaker 1: I think I don't know whether it accurately captured the energy. 59 00:03:15,120 --> 00:03:18,000 Speaker 1: But well, you know, being on on a floor, you 60 00:03:18,040 --> 00:03:20,280 Speaker 1: gotta understand it's crowded. There are a lot of people, 61 00:03:20,280 --> 00:03:21,840 Speaker 1: there's a lot of noise, or at least they used 62 00:03:21,880 --> 00:03:23,000 Speaker 1: to be. I mean, the floor of the n y 63 00:03:23,160 --> 00:03:25,400 Speaker 1: SC has gotten small and small and smaller. You know, 64 00:03:25,440 --> 00:03:27,840 Speaker 1: they've got an options pit. But even on Chicago. They've 65 00:03:27,840 --> 00:03:30,800 Speaker 1: gotten away from a lot of the traditional images of 66 00:03:30,840 --> 00:03:33,160 Speaker 1: people shouting back and forth. Yeah, this is the open 67 00:03:33,280 --> 00:03:37,560 Speaker 1: outcry system where people use sort of all this industry 68 00:03:37,680 --> 00:03:43,360 Speaker 1: jargon and very animated sort of trading, which is really 69 00:03:43,800 --> 00:03:47,520 Speaker 1: dying out now. It's kind of sad. It's for the 70 00:03:47,600 --> 00:03:50,280 Speaker 1: history books, you know, or for movies. All right, Well, 71 00:03:50,320 --> 00:03:52,640 Speaker 1: here with us today to talk about the history of 72 00:03:52,680 --> 00:03:55,760 Speaker 1: floor trading as well as its future. We have Keith 73 00:03:55,920 --> 00:03:59,760 Speaker 1: Bliss from Catone and Co. Inc. He is an actual 74 00:03:59,800 --> 00:04:02,040 Speaker 1: for a trader and he joins us today in studio. 75 00:04:02,320 --> 00:04:04,320 Speaker 1: Thank you, Tracy could to be with you. So maybe 76 00:04:04,360 --> 00:04:06,880 Speaker 1: just to begin, we've touched on it a little, but 77 00:04:06,960 --> 00:04:09,240 Speaker 1: could you give us an idea of what a floor 78 00:04:09,280 --> 00:04:12,120 Speaker 1: trader actually does? Well? Sure, I think it's worthwhile to 79 00:04:12,160 --> 00:04:15,320 Speaker 1: explain that there's actually a few different quote unquote floor 80 00:04:15,360 --> 00:04:17,560 Speaker 1: traders down on the floor of the New York Stock Exchange. 81 00:04:17,600 --> 00:04:20,800 Speaker 1: For example, you have the designated market maker, and their 82 00:04:20,839 --> 00:04:23,719 Speaker 1: sole purpose is to manage the inventory and keep a 83 00:04:23,880 --> 00:04:26,720 Speaker 1: continuous flow of trading going. So they must there it's 84 00:04:26,760 --> 00:04:29,520 Speaker 1: a it's a defined term where they must have orderly markets, 85 00:04:29,560 --> 00:04:32,280 Speaker 1: continuous orderly markets. And when you said inventory. You mean 86 00:04:32,360 --> 00:04:36,040 Speaker 1: inventory of stock, inventory of stock. That's correct. So remember 87 00:04:36,040 --> 00:04:38,560 Speaker 1: stock prices are really geared towards You can have analysts 88 00:04:38,560 --> 00:04:40,080 Speaker 1: that say that they think a stock needs to be 89 00:04:40,120 --> 00:04:42,640 Speaker 1: priced at this level based upon the dynamics of the company, 90 00:04:42,680 --> 00:04:46,159 Speaker 1: but really the price of stock, tick by tick, second 91 00:04:46,160 --> 00:04:49,279 Speaker 1: by second minute by men, is really determined by supplying demand, 92 00:04:49,320 --> 00:04:51,200 Speaker 1: and so you need an inventory manager like that, just 93 00:04:51,240 --> 00:04:53,280 Speaker 1: like any other product. So think about flea market or 94 00:04:53,320 --> 00:04:56,920 Speaker 1: farmers market. The second group that that you see down 95 00:04:56,920 --> 00:04:59,040 Speaker 1: on the floor, which is what I am, is an 96 00:04:59,040 --> 00:05:01,640 Speaker 1: actual floor broke. So to define the terms, you have 97 00:05:01,680 --> 00:05:04,640 Speaker 1: designated market maker. So there they are, they are exactly 98 00:05:04,680 --> 00:05:06,159 Speaker 1: what they're called. And then you have the floor broker. 99 00:05:06,200 --> 00:05:09,960 Speaker 1: The floor broker's main role is to represent a client 100 00:05:10,200 --> 00:05:14,880 Speaker 1: order into what's known as the trading crowd, to execute 101 00:05:14,880 --> 00:05:17,719 Speaker 1: that order either buy or sell orders, and then report 102 00:05:17,760 --> 00:05:20,680 Speaker 1: back to them what that executed price is. So those 103 00:05:20,720 --> 00:05:22,640 Speaker 1: are really the two main groups that you see down 104 00:05:22,640 --> 00:05:25,359 Speaker 1: on the floor. Another third group, because of changes that 105 00:05:25,360 --> 00:05:28,080 Speaker 1: have occurred over the years on the floor, are sales traders. 106 00:05:28,080 --> 00:05:31,800 Speaker 1: There's now an institutional sales trading community that you see 107 00:05:31,839 --> 00:05:33,279 Speaker 1: down on the floor, and if you look at old 108 00:05:33,320 --> 00:05:35,400 Speaker 1: pictures from the sixties and seventies, you would see these 109 00:05:35,400 --> 00:05:38,839 Speaker 1: really decrepit broker booths, you know, like they've been built 110 00:05:38,839 --> 00:05:40,600 Speaker 1: back in the middle of the eighteen hundreds, even though 111 00:05:40,600 --> 00:05:43,760 Speaker 1: the building was only built in nineteen o three. And 112 00:05:43,800 --> 00:05:48,040 Speaker 1: today we have much have very modern broker booth spaces 113 00:05:48,040 --> 00:05:50,840 Speaker 1: where my firm was one of the first to inhabit, 114 00:05:51,279 --> 00:05:52,960 Speaker 1: where we actually have seats and we get sit down 115 00:05:52,960 --> 00:05:54,920 Speaker 1: and we can do other other things inside of our 116 00:05:54,920 --> 00:05:56,960 Speaker 1: business floor. And they're the people that really interact with 117 00:05:57,000 --> 00:06:01,120 Speaker 1: the institutional community, whether it's large mutual funds, pension funds 118 00:06:01,120 --> 00:06:03,520 Speaker 1: and downs hedge funds and the like, who received the 119 00:06:03,600 --> 00:06:06,200 Speaker 1: orders to be executed inside of that market. How did 120 00:06:06,200 --> 00:06:09,560 Speaker 1: you actually get into the business. Came of age in 121 00:06:09,560 --> 00:06:11,240 Speaker 1: the middle of eighties, and of course Wall Street was 122 00:06:11,279 --> 00:06:14,360 Speaker 1: going and blowing and going to school at a at 123 00:06:14,360 --> 00:06:17,000 Speaker 1: a college that is halfway between New York and Philadelphia. 124 00:06:17,320 --> 00:06:19,320 Speaker 1: You had to go into financial solve all of us. 125 00:06:19,360 --> 00:06:21,080 Speaker 1: All of us decided we were going to go be 126 00:06:21,160 --> 00:06:24,440 Speaker 1: the new masters of the universe in the eighties and nineties. 127 00:06:24,440 --> 00:06:26,400 Speaker 1: But I found my way into City Bank, into the 128 00:06:26,400 --> 00:06:29,400 Speaker 1: commercial lending, went through their commercial credit training program, and 129 00:06:29,920 --> 00:06:32,080 Speaker 1: was was a bank or was a lender? Did that 130 00:06:32,200 --> 00:06:34,080 Speaker 1: for a while and then eventually ended up selling order 131 00:06:34,120 --> 00:06:38,000 Speaker 1: management software to buy side firms, which was my first 132 00:06:38,040 --> 00:06:41,400 Speaker 1: taste of what true Wall Street trading was all about. 133 00:06:41,640 --> 00:06:47,000 Speaker 1: From there, the technology inside of the industry connecting the 134 00:06:47,080 --> 00:06:50,640 Speaker 1: buy side to the cell side for order order flow 135 00:06:50,720 --> 00:06:53,000 Speaker 1: coming into the cell side and then executions going back 136 00:06:53,000 --> 00:06:56,520 Speaker 1: out was really burgeoning, where both sides of that transaction, 137 00:06:56,560 --> 00:06:58,200 Speaker 1: We're trying to figure out how to do this in 138 00:06:58,200 --> 00:07:02,000 Speaker 1: an electronic uh fashion, so that you could eliminate errors, 139 00:07:02,040 --> 00:07:04,159 Speaker 1: you could be quicker to market, you could be quicker 140 00:07:04,160 --> 00:07:06,880 Speaker 1: to your transaction. So I was hired into a firm 141 00:07:06,920 --> 00:07:10,360 Speaker 1: to actually run their institutional electronic trading because I had 142 00:07:10,440 --> 00:07:12,720 Speaker 1: lots of relationships on the buy side and also knew 143 00:07:12,720 --> 00:07:15,080 Speaker 1: what technology they were doing on the desk. So that 144 00:07:15,200 --> 00:07:17,280 Speaker 1: was that was a great That was a great job. 145 00:07:17,360 --> 00:07:20,680 Speaker 1: That was in thousand, when you know the market was 146 00:07:20,760 --> 00:07:23,960 Speaker 1: just ripping with fourteen and fifteen I p o s 147 00:07:24,000 --> 00:07:25,960 Speaker 1: a day. I worked for a very large NASTAC market 148 00:07:26,000 --> 00:07:29,160 Speaker 1: maker at that time. Eventually I left there with a 149 00:07:29,200 --> 00:07:33,200 Speaker 1: group and started a UM started an institutional desk at 150 00:07:33,280 --> 00:07:35,680 Speaker 1: you all maybe remember the old La Branching company. That 151 00:07:35,920 --> 00:07:38,760 Speaker 1: was where how I ended up on the floor. So 152 00:07:38,800 --> 00:07:40,960 Speaker 1: what was it actually like on the floor at that time, 153 00:07:41,320 --> 00:07:44,480 Speaker 1: because things were already changing a little bit, right they were, 154 00:07:44,600 --> 00:07:46,680 Speaker 1: it was still when I got to La Branch in 155 00:07:46,800 --> 00:07:49,960 Speaker 1: two thousand to the New York's Doctor Exchange was still 156 00:07:49,960 --> 00:07:54,400 Speaker 1: like private, mutually owned type of institution where you still 157 00:07:54,440 --> 00:07:57,480 Speaker 1: had seats. So there are one thousand, three hundred and 158 00:07:57,480 --> 00:07:59,520 Speaker 1: sixty six seats. You had a bias seat. You had 159 00:07:59,520 --> 00:08:01,960 Speaker 1: to actually have a seat in order to be allowed 160 00:08:02,160 --> 00:08:05,880 Speaker 1: to trade. That's correct and interesting to note. Like everything 161 00:08:05,920 --> 00:08:08,840 Speaker 1: inside of a trader's world, those seats traded like shares 162 00:08:08,880 --> 00:08:10,920 Speaker 1: of stock, and you could walk onto the floor and 163 00:08:10,960 --> 00:08:14,600 Speaker 1: actually see a bit and offer board for the seats 164 00:08:14,600 --> 00:08:17,600 Speaker 1: like a taxi medallion. Yeah, essentially the same thing. So 165 00:08:17,720 --> 00:08:20,800 Speaker 1: it and and phim is in as you know and tracy, 166 00:08:20,840 --> 00:08:23,120 Speaker 1: as you know, in a trader's world, if you can 167 00:08:23,240 --> 00:08:26,480 Speaker 1: trade it, we will trade it um. So that's kind 168 00:08:26,480 --> 00:08:28,480 Speaker 1: of that's kind of what we did. So at the height, 169 00:08:28,560 --> 00:08:30,960 Speaker 1: I think it was around two thousand two. At the height, 170 00:08:31,000 --> 00:08:34,000 Speaker 1: seats were actually trading for three million dollars a seat. 171 00:08:34,120 --> 00:08:37,560 Speaker 1: So when a gentleman named John Thing came over from 172 00:08:37,559 --> 00:08:42,800 Speaker 1: Goldman Sachs to become once Dick Grassa's compensation story came out. 173 00:08:42,840 --> 00:08:45,040 Speaker 1: Anybody can google that and see what I'm talking about there. 174 00:08:45,440 --> 00:08:48,520 Speaker 1: They replaced him with John Thane, and John Thing was 175 00:08:48,559 --> 00:08:50,560 Speaker 1: one of the big opponents against the New York Stock 176 00:08:50,559 --> 00:08:53,040 Speaker 1: Exchanged at that time, so really interesting hire to bring 177 00:08:53,120 --> 00:08:55,080 Speaker 1: him in. I think the thinking was that he could 178 00:08:55,120 --> 00:08:58,319 Speaker 1: start to blend the two sides of the business because 179 00:08:58,360 --> 00:09:02,160 Speaker 1: the New York was still very much an open outcry 180 00:09:02,320 --> 00:09:06,520 Speaker 1: auction market with human based trading had about market share 181 00:09:06,679 --> 00:09:10,080 Speaker 1: at that point in time. At any event, Um brought 182 00:09:10,160 --> 00:09:13,840 Speaker 1: him in and he was always the membership looked at 183 00:09:13,920 --> 00:09:15,440 Speaker 1: him with a John to die as soon as he 184 00:09:15,480 --> 00:09:17,880 Speaker 1: walked on the floor, because they always knew that that 185 00:09:18,200 --> 00:09:20,680 Speaker 1: his intent, his goal, and his ambition was basically to 186 00:09:20,679 --> 00:09:23,920 Speaker 1: turn the New York Stock Exchange into an electronic communication 187 00:09:24,000 --> 00:09:27,040 Speaker 1: network and a utility, basically get rid of them. Yeah, 188 00:09:27,080 --> 00:09:30,640 Speaker 1: that's correct. And and John Thane or orchestrated actually a 189 00:09:30,679 --> 00:09:35,720 Speaker 1: reverse merger um, which is where a private company takes 190 00:09:35,760 --> 00:09:38,240 Speaker 1: over a public company but then becomes a public company. 191 00:09:38,440 --> 00:09:40,880 Speaker 1: And he did that with Archipelago, and that's how the 192 00:09:40,920 --> 00:09:45,280 Speaker 1: New York became a public entity with shares of stock 193 00:09:45,320 --> 00:09:47,440 Speaker 1: that were traded, and at that point there were no 194 00:09:47,520 --> 00:09:50,240 Speaker 1: more private seat holders. All the seat holders were taken 195 00:09:50,280 --> 00:09:52,680 Speaker 1: out with shares of stock. I think each seat was 196 00:09:52,720 --> 00:09:56,080 Speaker 1: given somewhere in the neighborhood of eighties seven thousand shares 197 00:09:56,400 --> 00:10:00,360 Speaker 1: of stock per seit and and from that point forward, 198 00:10:00,360 --> 00:10:04,280 Speaker 1: then there was also a big move by the c ND, 199 00:10:04,960 --> 00:10:07,640 Speaker 1: by the A T S which stands for which is 200 00:10:07,760 --> 00:10:11,640 Speaker 1: alternative trading systems dark pools. You'll hear that term thrown 201 00:10:11,679 --> 00:10:15,160 Speaker 1: around to actually change the market structure, to make the 202 00:10:15,200 --> 00:10:19,280 Speaker 1: playing field more level, and actually to um get rid 203 00:10:19,320 --> 00:10:21,000 Speaker 1: of some of the market sure that the New York owned. 204 00:10:21,080 --> 00:10:23,480 Speaker 1: So that's where the market structure changes, basically take a 205 00:10:23,520 --> 00:10:25,559 Speaker 1: bite out of their business. Well, that's right. So that's 206 00:10:25,559 --> 00:10:27,640 Speaker 1: when the real changes on the floor started to happen. 207 00:10:27,640 --> 00:10:30,440 Speaker 1: In automation had to take over because they were making 208 00:10:30,520 --> 00:10:32,600 Speaker 1: less and less money. So I think a lot of 209 00:10:32,600 --> 00:10:37,040 Speaker 1: our listeners probably have a characterization of floor traders and 210 00:10:37,080 --> 00:10:40,800 Speaker 1: the sort of open outcry pits as these really macho, 211 00:10:41,000 --> 00:10:44,640 Speaker 1: gung ho places. Is it actually like that or was 212 00:10:44,720 --> 00:10:47,520 Speaker 1: there's a lot of testosterone on the floor. Yes, that 213 00:10:47,520 --> 00:10:50,400 Speaker 1: that is accurate. There's over the course of history and 214 00:10:50,440 --> 00:10:52,959 Speaker 1: even today, there are very few females, although there are, 215 00:10:52,800 --> 00:10:55,040 Speaker 1: there are the brave few that will that will stand 216 00:10:55,040 --> 00:10:57,680 Speaker 1: in there and I and it, and you're right, it's 217 00:10:57,720 --> 00:11:01,720 Speaker 1: not it's not elbow to elbow, shoulder to shoulder, fist 218 00:11:01,720 --> 00:11:06,280 Speaker 1: to fist at times open outcry auction trading that still 219 00:11:06,280 --> 00:11:10,360 Speaker 1: occurs sometimes, particularly in in periods of market distress, where 220 00:11:10,400 --> 00:11:13,079 Speaker 1: you do need to hold an auction to actually discover 221 00:11:13,160 --> 00:11:15,920 Speaker 1: the price, the right price for a buyer and seller 222 00:11:15,960 --> 00:11:19,559 Speaker 1: to come together. Um, yes, everybody has a perception that 223 00:11:19,679 --> 00:11:21,679 Speaker 1: also the perception is a lot of paper flying around 224 00:11:21,760 --> 00:11:23,960 Speaker 1: and there's garbage everywhere. I will say, there there is 225 00:11:23,960 --> 00:11:27,839 Speaker 1: some garbage around, but now it's pretty docile place at 226 00:11:27,840 --> 00:11:29,959 Speaker 1: this point in time. And and and if you had 227 00:11:29,960 --> 00:11:32,080 Speaker 1: the opportunity like I did to walk on the floor 228 00:11:32,240 --> 00:11:35,479 Speaker 1: in the in the late eighties and throughout the nineties, 229 00:11:35,800 --> 00:11:38,400 Speaker 1: I was always struck by the number of people were there. 230 00:11:38,440 --> 00:11:41,040 Speaker 1: And and at the height there were five thousand people 231 00:11:41,080 --> 00:11:43,840 Speaker 1: working in the five trading floors and two thousand hard 232 00:11:43,840 --> 00:11:45,560 Speaker 1: to image for those who have been there, and you 233 00:11:45,559 --> 00:11:49,440 Speaker 1: actually see how small the space is. But it was 234 00:11:49,600 --> 00:11:54,640 Speaker 1: controlled chaos. Everybody knew their role, the runners, the trade reporters, 235 00:11:54,679 --> 00:11:58,199 Speaker 1: the brokers, the specialists, the clerks in the booth, they 236 00:11:58,200 --> 00:12:00,040 Speaker 1: all had their role. They it was all very to 237 00:12:00,120 --> 00:12:03,520 Speaker 1: find um and anybody from the outside walking on there, 238 00:12:03,520 --> 00:12:06,640 Speaker 1: I thought it was just mayhem. Is there a sort 239 00:12:06,640 --> 00:12:12,480 Speaker 1: of crazy anecdote that's shareable for our listeners? Consider this 240 00:12:12,600 --> 00:12:17,240 Speaker 1: prime time? Sure, it's it's certainly family friendly and I 241 00:12:17,280 --> 00:12:21,000 Speaker 1: think everybody will will get amused by it. But um, 242 00:12:21,040 --> 00:12:22,640 Speaker 1: one of the stories that I always tell when I 243 00:12:22,640 --> 00:12:25,480 Speaker 1: bring visitors down to the floor of the exchange, I 244 00:12:25,600 --> 00:12:27,319 Speaker 1: was not there, but you hear the old timers talk 245 00:12:27,360 --> 00:12:31,640 Speaker 1: about it. It's quite humor. So like any community of 246 00:12:31,679 --> 00:12:33,800 Speaker 1: a bunch of men walking around, be at a fraternity 247 00:12:33,840 --> 00:12:37,760 Speaker 1: house and Elks lodge trading floor, there's lots of practical 248 00:12:37,840 --> 00:12:40,000 Speaker 1: jokes that take place. Um. And one of one of 249 00:12:40,040 --> 00:12:42,199 Speaker 1: the best stories that they talked about, one of the 250 00:12:42,240 --> 00:12:45,560 Speaker 1: most favorite days of brokers and traders from that era, 251 00:12:45,720 --> 00:12:48,520 Speaker 1: was the day that Ronald Reagan came down and visited 252 00:12:48,559 --> 00:12:51,480 Speaker 1: the floor. And if you knew anything about Ronald Reagan, 253 00:12:51,480 --> 00:12:54,000 Speaker 1: whenever he stepped out in public and probably in private too, 254 00:12:54,080 --> 00:12:58,280 Speaker 1: he was always spitshined, creased, never a hair out of place. 255 00:12:58,679 --> 00:13:01,839 Speaker 1: You know, he all he under diod the effect of 256 00:13:01,880 --> 00:13:03,880 Speaker 1: being a dignified president, and he wanted to show that 257 00:13:03,920 --> 00:13:05,560 Speaker 1: all the time. So sure enough, when he came down 258 00:13:05,559 --> 00:13:09,080 Speaker 1: to the floor, his his navy blue suit was perfect. 259 00:13:09,200 --> 00:13:12,320 Speaker 1: His shoes were polished like mirrors. But one of the 260 00:13:12,360 --> 00:13:14,640 Speaker 1: tricks that they one of the practical jokes on the 261 00:13:14,679 --> 00:13:16,720 Speaker 1: floor that they do, is they powder somebody's shoes. So 262 00:13:16,760 --> 00:13:19,400 Speaker 1: if somebody goes out and gets yeah, if somebody goes 263 00:13:19,400 --> 00:13:21,880 Speaker 1: out and gets the shoe shine somebody, that will distract 264 00:13:22,000 --> 00:13:23,920 Speaker 1: the person. They'll sneak up behind him and they'll throw 265 00:13:23,960 --> 00:13:25,680 Speaker 1: baby powder on their shoes. Well, if you've ever tried 266 00:13:25,720 --> 00:13:29,040 Speaker 1: to clean baby patter off of freshly shined shoes, you 267 00:13:29,080 --> 00:13:31,360 Speaker 1: know that's a disaster. You have to go get them reshined. 268 00:13:31,480 --> 00:13:35,200 Speaker 1: So Ronald Reagan's coming to the floor, A bunch of 269 00:13:35,240 --> 00:13:37,319 Speaker 1: the brokers get together and say we're going to powder 270 00:13:37,320 --> 00:13:40,839 Speaker 1: reagan shoes. Oh my god. Well, Dick Grasso had caught 271 00:13:41,520 --> 00:13:44,720 Speaker 1: wind of this little scheme and decided that he was 272 00:13:44,720 --> 00:13:46,840 Speaker 1: going to intervene and tell them, no, no, no, you're 273 00:13:46,880 --> 00:13:49,720 Speaker 1: not You're not powdering the shoes. Of the most powerful 274 00:13:49,720 --> 00:13:52,160 Speaker 1: man in the world and the floor brokers, who you know, 275 00:13:52,200 --> 00:13:54,280 Speaker 1: had a love hate relationship with Dick Rasso. He would 276 00:13:54,320 --> 00:13:55,920 Speaker 1: watch out for them, but they really didn't like him 277 00:13:55,920 --> 00:13:59,160 Speaker 1: coming down with his heavy hand and telling them what 278 00:13:59,360 --> 00:14:01,760 Speaker 1: not to do. Decided that they were going to go 279 00:14:01,800 --> 00:14:04,520 Speaker 1: around them. So they actually went to the Secret Service 280 00:14:04,559 --> 00:14:07,480 Speaker 1: agents that were Reagan and they planned this in the 281 00:14:07,520 --> 00:14:09,920 Speaker 1: Secret Service. You would have to have them on side, right, 282 00:14:10,200 --> 00:14:13,160 Speaker 1: Oh yeah, absolutely, because I mean to get close to 283 00:14:13,240 --> 00:14:15,640 Speaker 1: the president. And as a side note, what they said 284 00:14:15,720 --> 00:14:17,840 Speaker 1: was when Reagan came onto the floor of the Secret Service, 285 00:14:17,880 --> 00:14:20,720 Speaker 1: agent steppeds like as Reagan wanted to get into the 286 00:14:20,760 --> 00:14:24,360 Speaker 1: crowd he was that he was that type of human being. 287 00:14:25,280 --> 00:14:28,680 Speaker 1: Um So, at any event they were in cahoots with 288 00:14:28,720 --> 00:14:31,000 Speaker 1: the Secret Service, the Secret Service City, yep, would be great. 289 00:14:31,000 --> 00:14:33,960 Speaker 1: Reagan would love it, you know, he wants to experience 290 00:14:34,000 --> 00:14:37,520 Speaker 1: things like that. He wanted to be pranked. Um So 291 00:14:38,200 --> 00:14:40,480 Speaker 1: they had made that, but of course they were somewhat 292 00:14:40,480 --> 00:14:44,160 Speaker 1: fearful of Grasso. So Grasso made sure that he was 293 00:14:44,200 --> 00:14:46,600 Speaker 1: with Reagan every step of the way on the floor 294 00:14:46,680 --> 00:14:48,840 Speaker 1: to ensure that the floor brokers didn't do it. So 295 00:14:49,600 --> 00:14:52,480 Speaker 1: I think Reagan was confused while Grasso was looking at 296 00:14:52,480 --> 00:14:54,800 Speaker 1: his shoes the entire time. Well, I think what it 297 00:14:54,880 --> 00:14:57,280 Speaker 1: was is Grasso was like it was like a satellite 298 00:14:57,280 --> 00:15:00,800 Speaker 1: beacon scanning the floor, you know, way for the enemy, 299 00:15:00,880 --> 00:15:03,240 Speaker 1: lurking about to compowder Reagan shoes. So what so what 300 00:15:03,240 --> 00:15:05,400 Speaker 1: do they do that? In powder Reagan shoes while Grass 301 00:15:05,520 --> 00:15:10,760 Speaker 1: was talking to Regan, powdered Grasso shoes, which I'm sure 302 00:15:10,840 --> 00:15:12,800 Speaker 1: got a few of them in trouble later. But apparently 303 00:15:12,840 --> 00:15:15,240 Speaker 1: Ronald Reagan found that great fun and really enjoyed his 304 00:15:15,320 --> 00:15:18,160 Speaker 1: day as a result. That's great. Well, I was going 305 00:15:18,200 --> 00:15:20,760 Speaker 1: to ask, we do have this big debate still going 306 00:15:20,800 --> 00:15:24,560 Speaker 1: on in the industry about, you know, computerized training versus 307 00:15:24,680 --> 00:15:29,360 Speaker 1: the human high touch element. What is actually the benefit 308 00:15:29,480 --> 00:15:33,320 Speaker 1: of having an actual person such as yourself work through 309 00:15:33,360 --> 00:15:38,640 Speaker 1: these trades In any transaction that happens in life, whether 310 00:15:38,680 --> 00:15:42,600 Speaker 1: you're buying a gallon of milk, a dozen eggs, or 311 00:15:43,040 --> 00:15:46,920 Speaker 1: a block of stock, it's it comes down to the 312 00:15:46,960 --> 00:15:50,440 Speaker 1: notion of price theory and price discovery. What is the 313 00:15:50,520 --> 00:15:52,960 Speaker 1: right price to buy that item and what is the 314 00:15:53,080 --> 00:15:55,920 Speaker 1: right price to sell that item? And that really is 315 00:15:56,080 --> 00:15:59,120 Speaker 1: either an electronic or manual auction that takes place the 316 00:15:59,160 --> 00:16:01,800 Speaker 1: benefit of having human at times in the middle of 317 00:16:01,880 --> 00:16:04,640 Speaker 1: that transaction. And let me say this, for very liquid 318 00:16:04,680 --> 00:16:07,320 Speaker 1: stocks that are moving a lot all the time, you 319 00:16:07,360 --> 00:16:11,280 Speaker 1: can discover price very quickly using electronic means to get there. 320 00:16:11,600 --> 00:16:14,520 Speaker 1: Larger blocks require a little bit more thought and a 321 00:16:14,600 --> 00:16:18,560 Speaker 1: little bit more ingenuity to discover the right price. So, 322 00:16:18,760 --> 00:16:21,080 Speaker 1: for example, if I want to buy five million shares 323 00:16:21,200 --> 00:16:25,520 Speaker 1: of City Group, and I can go electronically and buy 324 00:16:25,560 --> 00:16:29,480 Speaker 1: that five million shares, are blocks of that in increments 325 00:16:29,880 --> 00:16:33,480 Speaker 1: um from fifty dollars all the way up to fifty 326 00:16:33,960 --> 00:16:36,320 Speaker 1: and ten cents? Or if I can walk into a 327 00:16:36,360 --> 00:16:39,520 Speaker 1: crowd and negotiate on a manual means and buy that 328 00:16:39,560 --> 00:16:43,120 Speaker 1: block of stock forty cents, what should I do for 329 00:16:43,200 --> 00:16:47,120 Speaker 1: my custom and it's buy the stock forts So that's 330 00:16:47,160 --> 00:16:49,360 Speaker 1: that's part of the reason that we have a hybrid 331 00:16:49,440 --> 00:16:51,920 Speaker 1: model in the New York. Most of the order flowing 332 00:16:51,960 --> 00:16:55,160 Speaker 1: transaction is done electronically with algorithms running in the background. 333 00:16:55,160 --> 00:16:57,960 Speaker 1: But there are situations a lot of situations, particularly around 334 00:16:58,000 --> 00:17:00,720 Speaker 1: the open of the market, to close the market, or 335 00:17:00,920 --> 00:17:05,520 Speaker 1: in times of market distress. Um we're a human talking 336 00:17:05,520 --> 00:17:08,080 Speaker 1: to another human to be able to negotiate the true 337 00:17:08,119 --> 00:17:12,080 Speaker 1: price for that transaction provides a greater amount of benefit 338 00:17:12,119 --> 00:17:16,720 Speaker 1: as opposed to somebody sitting in Beijing. Uh, In somebody 339 00:17:16,760 --> 00:17:19,040 Speaker 1: sitting in New York staring on a computer terminal and 340 00:17:19,119 --> 00:17:21,600 Speaker 1: trying to get to that price. I can execute and 341 00:17:21,640 --> 00:17:26,720 Speaker 1: get that transaction done quicker, cleaner, dampen the volatility, and 342 00:17:26,800 --> 00:17:31,160 Speaker 1: hopefully make both sides of the transaction happy as a result. Keith, 343 00:17:31,320 --> 00:17:33,960 Speaker 1: I wonder if you could describe for us or tell us, 344 00:17:34,680 --> 00:17:38,480 Speaker 1: are there any bits of wisdom that you would offer 345 00:17:39,200 --> 00:17:42,600 Speaker 1: for the amateur investor, not the person who's getting paid 346 00:17:42,600 --> 00:17:45,000 Speaker 1: to manage their own money, someone who's has to manage 347 00:17:45,040 --> 00:17:48,240 Speaker 1: their own money or is managing their own money. Uh, 348 00:17:48,520 --> 00:17:52,080 Speaker 1: you must hear a lot of potential great investments and 349 00:17:52,119 --> 00:17:55,160 Speaker 1: things you've learned a lot about following those kinds of things. 350 00:17:55,160 --> 00:17:57,600 Speaker 1: Tell us about it. Well, there's a couple of things 351 00:17:57,600 --> 00:18:00,639 Speaker 1: from the from the trading standpoint, I absolutely would Uh. 352 00:18:02,440 --> 00:18:05,280 Speaker 1: Have your goals clearly defined about why you're playing in this. 353 00:18:05,640 --> 00:18:07,719 Speaker 1: If you're planning to try and skim a few pennies 354 00:18:07,760 --> 00:18:10,280 Speaker 1: every time you walk into a trade, that's one way 355 00:18:10,320 --> 00:18:13,040 Speaker 1: to do it. If you think you're sixty years old 356 00:18:13,080 --> 00:18:16,000 Speaker 1: and you're going to suddenly increase your retirement nest egg 357 00:18:16,119 --> 00:18:19,720 Speaker 1: by day trading, You're flat wrong. You will be working 358 00:18:20,240 --> 00:18:24,320 Speaker 1: until you probably die by doing something like that. UM 359 00:18:24,440 --> 00:18:31,040 Speaker 1: people need to remember that the markets are regulated environment 360 00:18:31,280 --> 00:18:34,320 Speaker 1: where you're able to put money at risk in a legal, 361 00:18:34,440 --> 00:18:37,960 Speaker 1: regulated way across the world. So the reason I term 362 00:18:38,000 --> 00:18:41,200 Speaker 1: it that way is it's not unlike a casino, And 363 00:18:41,280 --> 00:18:44,160 Speaker 1: anybody knows anything about casinos knows that the house always 364 00:18:44,200 --> 00:18:48,960 Speaker 1: wins in casinos. So do not get UM allured by 365 00:18:49,080 --> 00:18:51,760 Speaker 1: come on schemes or people who are going to say 366 00:18:51,800 --> 00:18:55,119 Speaker 1: this next penny stock is going to be the next Facebook. 367 00:18:55,160 --> 00:18:59,600 Speaker 1: It's not UM. And the second thing that I that 368 00:18:59,640 --> 00:19:02,119 Speaker 1: always advised people, and this is the most challenging, is 369 00:19:02,280 --> 00:19:06,880 Speaker 1: take all emotion out of your trading, which means it's 370 00:19:06,960 --> 00:19:11,240 Speaker 1: very hard to sell when skies are blue. It's very 371 00:19:11,280 --> 00:19:13,399 Speaker 1: hard to buy when the world is coming apart at 372 00:19:13,440 --> 00:19:15,199 Speaker 1: the seams. But you've got to learn to do that. 373 00:19:15,240 --> 00:19:17,439 Speaker 1: Warm Buffett does that, and all we need to do 374 00:19:17,480 --> 00:19:19,960 Speaker 1: is look at his success. I have a one more 375 00:19:20,040 --> 00:19:22,960 Speaker 1: question for you before we wrap it up. But when 376 00:19:23,000 --> 00:19:25,280 Speaker 1: you look at the big changes that have taken over 377 00:19:25,320 --> 00:19:28,080 Speaker 1: the stock market, over the past twenty years. You know, 378 00:19:28,119 --> 00:19:30,560 Speaker 1: there used to be five thousand people on the floor. 379 00:19:30,840 --> 00:19:35,320 Speaker 1: Now there's probably a little less than a thousand. Yeah. Um, 380 00:19:35,840 --> 00:19:38,159 Speaker 1: you know in ten years time, what's it going to 381 00:19:38,280 --> 00:19:41,680 Speaker 1: look like? You know, A lot of that is going 382 00:19:41,960 --> 00:19:46,520 Speaker 1: to depend upon how market structure changes over the years, 383 00:19:46,680 --> 00:19:50,560 Speaker 1: and the microstructure inside of each of the exchanges has 384 00:19:50,600 --> 00:19:53,960 Speaker 1: to adapt to the changes in market structure. So I'll 385 00:19:54,000 --> 00:19:56,639 Speaker 1: take you back a little bit. So in two thousand five, 386 00:19:56,800 --> 00:19:59,320 Speaker 1: two thousand six, there was a new regulation that was 387 00:19:59,359 --> 00:20:02,280 Speaker 1: imposed upon on um equity trading here in the United 388 00:20:02,320 --> 00:20:06,560 Speaker 1: States called Regulation NMS, regulation National Market System. That was 389 00:20:06,640 --> 00:20:11,520 Speaker 1: really the big bang for the explosion in exchanges, and 390 00:20:11,680 --> 00:20:14,520 Speaker 1: a t S is alternative trading systems here in the 391 00:20:14,600 --> 00:20:18,440 Speaker 1: United States. So if you take back into the nineties, 392 00:20:18,480 --> 00:20:22,600 Speaker 1: there were really three major exchanges here in the United States. 393 00:20:22,680 --> 00:20:25,080 Speaker 1: There was the New York Stock Exchanged, the NASTACK market 394 00:20:25,119 --> 00:20:28,919 Speaker 1: in the American Stock Exchange uh nearly a VOUM was 395 00:20:28,960 --> 00:20:31,480 Speaker 1: dominated by the New York, the MX and the NASDACK. 396 00:20:32,440 --> 00:20:35,600 Speaker 1: Since regulation n MS, there are now twelve equity exchanges 397 00:20:35,880 --> 00:20:40,159 Speaker 1: in the country and roughly forty authorized a T S 398 00:20:40,200 --> 00:20:42,879 Speaker 1: S or dark pools. So what that is created is 399 00:20:42,880 --> 00:20:45,879 Speaker 1: a very fragmented marketplace. And and another piece of the 400 00:20:45,960 --> 00:20:49,680 Speaker 1: rule of regaan Ms, which is really led to the 401 00:20:49,680 --> 00:20:52,280 Speaker 1: the destruction and the market show the New York Stock Exchanges. 402 00:20:52,320 --> 00:20:54,840 Speaker 1: We are now bound to go to the market that 403 00:20:54,880 --> 00:20:58,440 Speaker 1: has the best best execution outcome for our clients, meaning 404 00:20:58,440 --> 00:21:01,080 Speaker 1: the best price and volume. So if I'm moving at 405 00:21:01,160 --> 00:21:04,800 Speaker 1: large block of stock, that doesn't mean getting a million 406 00:21:04,800 --> 00:21:07,560 Speaker 1: shares done in the same place. What that means is 407 00:21:07,600 --> 00:21:11,720 Speaker 1: probably getting lots of one hundred to five hundred done 408 00:21:11,720 --> 00:21:16,439 Speaker 1: in about twenty different locations. Have to essentially have to 409 00:21:17,240 --> 00:21:20,200 Speaker 1: the analogy that I always give to everybody. As I said, 410 00:21:20,200 --> 00:21:22,560 Speaker 1: this has created a problem, and I actually think I've 411 00:21:22,560 --> 00:21:24,719 Speaker 1: never been able to prove it empirically, but I actually 412 00:21:24,720 --> 00:21:27,919 Speaker 1: think it's increased the cost of training because imagine a 413 00:21:27,960 --> 00:21:30,680 Speaker 1: world where you wanted to go buy a dozen eggs, 414 00:21:31,600 --> 00:21:33,840 Speaker 1: but grocery stores only sold one egg at a time, 415 00:21:34,640 --> 00:21:36,480 Speaker 1: so you had to drive around to twelve places to 416 00:21:36,520 --> 00:21:39,400 Speaker 1: negotiate the price for each eck. You may ultimately get 417 00:21:39,440 --> 00:21:43,040 Speaker 1: that dozen eggs at a cheaper absolute price than if 418 00:21:43,040 --> 00:21:44,920 Speaker 1: you bought it all at once, but by the time 419 00:21:44,960 --> 00:21:46,800 Speaker 1: you added up the time in the gasoline that you 420 00:21:46,880 --> 00:21:49,159 Speaker 1: used to get through your training, your costs actually went up. 421 00:21:49,160 --> 00:21:51,440 Speaker 1: So that's where we are now, and I think people 422 00:21:51,480 --> 00:21:55,320 Speaker 1: have really started to come to that realization that it 423 00:21:55,960 --> 00:21:59,120 Speaker 1: was good in theory creating more competition, which should drive 424 00:21:59,160 --> 00:22:02,040 Speaker 1: down prices and do better for the retail investor. But 425 00:22:02,080 --> 00:22:03,600 Speaker 1: what I think it is done, it's actually created an 426 00:22:03,680 --> 00:22:05,919 Speaker 1: environment where it's become more costly. So there's actually a 427 00:22:05,920 --> 00:22:09,320 Speaker 1: move to think about going back to a more centralized 428 00:22:09,359 --> 00:22:11,760 Speaker 1: type of trading scheme was known as a club or 429 00:22:11,840 --> 00:22:15,520 Speaker 1: centralized limit order book, and those changes may come to pass. 430 00:22:15,560 --> 00:22:17,720 Speaker 1: I'm not sure it's going to happen. The other thing 431 00:22:17,720 --> 00:22:20,199 Speaker 1: that they talk about is is we went to in 432 00:22:20,200 --> 00:22:24,280 Speaker 1: two thousand one, we went from trading in fractions down 433 00:22:24,359 --> 00:22:28,920 Speaker 1: to pennies, and that really led to a big pim 434 00:22:28,960 --> 00:22:31,760 Speaker 1: is shaking his head, Yeah, I agree with them. H Well, 435 00:22:31,800 --> 00:22:34,520 Speaker 1: I was just gonna say that it really prevented a 436 00:22:34,560 --> 00:22:37,240 Speaker 1: whole group of people from making a living and it 437 00:22:37,359 --> 00:22:40,400 Speaker 1: removed that buffer. Yeah, because they said, if you can't 438 00:22:40,400 --> 00:22:42,880 Speaker 1: make a living doing this, why I did? Why would 439 00:22:42,880 --> 00:22:45,199 Speaker 1: I do it? That was the unintended consequence of I 440 00:22:45,240 --> 00:22:47,720 Speaker 1: think what they were trying to do is drive that 441 00:22:47,800 --> 00:22:51,800 Speaker 1: spreads down to a penny. There for making it more 442 00:22:51,800 --> 00:22:55,280 Speaker 1: transparent on the trade and also ostensibly making it cheaper 443 00:22:55,320 --> 00:22:57,240 Speaker 1: for retail investors to get on a trade they could 444 00:22:57,280 --> 00:22:59,199 Speaker 1: they could then participate with the institution. But what it's 445 00:22:59,240 --> 00:23:01,439 Speaker 1: done is you're right, it's actually driven people away from 446 00:23:01,480 --> 00:23:05,280 Speaker 1: the business. There's no spread. Again, similar to a flea 447 00:23:05,400 --> 00:23:07,760 Speaker 1: market or a farmer's market. When you go buy a 448 00:23:07,800 --> 00:23:10,359 Speaker 1: bushel of peas from a from a farmer, you're buying 449 00:23:10,359 --> 00:23:12,359 Speaker 1: in at ten dollars a bushel, while his price is 450 00:23:12,400 --> 00:23:14,920 Speaker 1: really nine dollars a bushel, and he's earning that spread 451 00:23:14,920 --> 00:23:16,960 Speaker 1: in between the same with stock trading, when he gets 452 00:23:16,960 --> 00:23:18,639 Speaker 1: down to a penny, there's very little spread. When it 453 00:23:18,680 --> 00:23:21,479 Speaker 1: was a sixteen, that's six and a quarter cents, so 454 00:23:21,520 --> 00:23:23,440 Speaker 1: you had to built in you had a built in 455 00:23:23,520 --> 00:23:26,360 Speaker 1: margin every time you traded. So what it also did 456 00:23:26,440 --> 00:23:30,240 Speaker 1: is it drove liquidity away from various price points inside 457 00:23:30,240 --> 00:23:32,679 Speaker 1: of a market. So if anybody's traded stocks, or if 458 00:23:32,680 --> 00:23:34,520 Speaker 1: you have it, you know that there are different price points. 459 00:23:34,520 --> 00:23:36,359 Speaker 1: People are willing to buy and sell stock at different 460 00:23:36,359 --> 00:23:39,879 Speaker 1: price points, away from what's called the inside market or 461 00:23:39,920 --> 00:23:42,440 Speaker 1: the national best bidder offer. What we do here, Well, 462 00:23:42,440 --> 00:23:44,760 Speaker 1: that liquidity just evaporated when you went to a penny 463 00:23:44,760 --> 00:23:47,160 Speaker 1: wide spread and you couldn't get large blocks of stock done. 464 00:23:47,760 --> 00:23:51,440 Speaker 1: Increase the cost for institutional investors created a lot of aggravation, 465 00:23:51,760 --> 00:23:54,280 Speaker 1: increased um. And this is the other side of the equation, 466 00:23:54,320 --> 00:23:57,200 Speaker 1: not just trading costs, but also clearing costs, which is 467 00:23:57,200 --> 00:24:00,280 Speaker 1: a very large component and expense inside of our business US. 468 00:24:00,400 --> 00:24:02,920 Speaker 1: And so anyway, I think the institutions are getting back 469 00:24:02,960 --> 00:24:05,560 Speaker 1: to saying, hey, let's rethink this a little bit. Maybe 470 00:24:05,560 --> 00:24:09,959 Speaker 1: we should go to maybe nickel spread increments and maybe 471 00:24:10,400 --> 00:24:13,720 Speaker 1: bringing liquidity back to a more centralized market place. I'm 472 00:24:13,760 --> 00:24:15,520 Speaker 1: hopeful that's what we'll see in the next ten years. 473 00:24:16,000 --> 00:24:18,439 Speaker 1: I'm not convinced the regulators think that's a good idea, 474 00:24:19,359 --> 00:24:23,199 Speaker 1: but news out eleven as they say, all right, Keith Bliss, 475 00:24:23,200 --> 00:24:28,360 Speaker 1: thank you so much, my pleasure. The auction market created 476 00:24:28,400 --> 00:24:33,440 Speaker 1: by public orders, responsive to your needs, man by experts. 477 00:24:33,960 --> 00:24:39,240 Speaker 1: It is central, flexible liquid. Each day, this market handles 478 00:24:39,240 --> 00:24:43,120 Speaker 1: more than one five million dollars in buy and sell order. 479 00:24:43,480 --> 00:24:46,240 Speaker 1: All right, PIM would we learn well, I learned that 480 00:24:46,280 --> 00:24:48,520 Speaker 1: it was pretty exciting to be on the floor of 481 00:24:48,560 --> 00:24:51,240 Speaker 1: the New York Stock Exchange, but that it's also tough 482 00:24:51,280 --> 00:24:54,280 Speaker 1: and that you should probably get your elbows sharpened if 483 00:24:54,320 --> 00:24:56,399 Speaker 1: you want to do well. Yeah. I really like that 484 00:24:56,480 --> 00:25:00,520 Speaker 1: anecdote about Reagan Um. The other thing I like was 485 00:25:00,720 --> 00:25:06,040 Speaker 1: the idea that regulations aren't always uh, regulations don't always 486 00:25:06,040 --> 00:25:09,880 Speaker 1: have the intended effect. The site the law of unintended 487 00:25:09,960 --> 00:25:14,000 Speaker 1: consequences right exactly, So this idea that regulators wanted to 488 00:25:14,080 --> 00:25:17,240 Speaker 1: encourage competition, but then they end up actually making it 489 00:25:17,280 --> 00:25:21,000 Speaker 1: more expensive or tougher for investors to you know, trade 490 00:25:21,000 --> 00:25:24,480 Speaker 1: in stocks. That was pretty interesting. Also the recognition that 491 00:25:24,600 --> 00:25:28,800 Speaker 1: technology marches on and there's very little that human beings 492 00:25:28,840 --> 00:25:32,679 Speaker 1: can do in order to thwart its advance. Don't stand 493 00:25:32,680 --> 00:25:35,439 Speaker 1: in the way of technology. That's get on that train. 494 00:25:36,000 --> 00:25:38,640 Speaker 1: All right, Well, thanks again for joining me. It's a pleasure. 495 00:25:38,720 --> 00:25:41,320 Speaker 1: I'm Pim Fox. I am the co host of Taking 496 00:25:41,320 --> 00:25:44,720 Speaker 1: Stock on Bloomberg Radio two pm Wall Street time to 497 00:25:44,840 --> 00:25:48,159 Speaker 1: four thirty pm, just after the close, and you can 498 00:25:48,200 --> 00:25:52,400 Speaker 1: follow me on Twitter at Pim Fox. And I'm Tracy Alloway, 499 00:25:52,480 --> 00:25:56,800 Speaker 1: executive editor of Bloomberg Markets. I'm on Twitter at Tracy Alloway. 500 00:25:56,880 --> 00:26:00,359 Speaker 1: And our guest Keith Bliss is also on Twitter, is 501 00:26:00,480 --> 00:26:04,399 Speaker 1: at kb Gunner one. Thanks so much for listening.