GlitchWatch: John Thain In Defense of Specialists?

Author:
Publish date:

Reading the remarks of John Thain is the new Kremlinology.
As we noted in our earlier item, Thain defended the hybrid system yesterday. But one thing we didn't get around to noticing until we re-watched the interview this morning is that hain defended not just the electronic aspects of the hybrid system but the human components as well.
"If anything I think that yesterday proved that we still need people here. And that's really what hybrid is all about. And people were able to deal with, and really to overcome, the technical problems at the close yesterday," Thain told CNBC.
Thain's defense of the human element on the trading floor got our attention because it came on the heels of the announcement that Goldman managing partner Duncan Niederauer, who reportedly strongly favors moving to a fully electronic trading system, had been tapped to become a high-ranking executive at the exchange. There had been speculation that Niederauer's arrival at the NYSE might presage a move to eliminate the specialists.
The hybrid system has been controversial, especially among specialists who trade on the floor of the New York Stock Exchange. Hybrid combines human traders with electronic trading and it's introduction has led to a reduction in the number of traders on the floors of the exchange. Some specialists view the hybrid system as a sort of Trojan Horse for the eventual move to totally a automated, electronic system that would eliminate the specialists all together.
Some have pinned the blame for Tuesdays problems squarely on the electronic components of hybrid and the reduction of traders on the floor of the exchange. Traders we spoke to Tuesday evening pointed to this problem. And this opinion isn't just confined to specialists (who obviously have an interest in blaming the electronic systems they fear may make them redundant). CNBC star reporter Charlie Gasparino also argued that the hybrid system was compromised by an inadequate number of specialists.
"One of the reasons why we had problems yesterday is because there aren't enough specialists inside the hybrid working to make markets," Gasparino said last night on CNBC's "On The Money" program. "Ninety-percent of the time the electronic markets can work fine. You need specialists when you have these huge order imbalances."

Related