The New York Stock Exchange in 1999, the year that the Dow closed above the 10000 mark for the first time.
Photo: Jonathan Elderfield/Getty ImagesJim Maguire was on the floor of the New York Stock Exchange when the Dow Jones Industrial Average crashed in 1987, when it zoomed past 10000 in 1999 and when it tumbled in 2008.
But as Wall Street descended into its current crisis this month, Mr. Maguire watched the market’s gyrations from an office building in Red Bank, N.J., across the street from an ice-cream parlor. Mr. Maguire, 58 years old, is still in the stock-trading business, though one that looks and sounds unlike the NYSE floor he left for good in 2011.
On Monday the NYSE will temporarily close its iconic floor to prevent the spread of coronavirus. The industry’s trading floors have been emptying out. But traders have been disappearing from Wall Street for a long time.
Jim Maguire working on the floor of the New York Stock Exchange on Dec. 30, 1999.
Photo: Peter Morgan/REUTERSNearly all trades are executed electronically now. Money managers routed just 31% of their stock trades through traditional Wall Street sales desks in 2018, according to Tabb Group. That is down from 47% in 2006.
With the coronavirus outbreak confining many to their homes, the tools that have made it possible for many to do their jobs off the floor, from videoconferencing to internet-protocol telephony, will now be put to the test.
Every year, the industry built around the U.S. stock market loses more traders, salespeople and analysts as the electronification of trading squeezes out tasks once performed by human hands. The 12 biggest global investment banks employed 26% fewer of those workers at the end of last year than they did in 2010, according to industry-data firm Coalition Ltd.
And many of those traders who remain, including Mr. Maguire, once a floor broker on the NYSE, no longer make their way to Wall Street before the morning’s opening bell. “It’s so quiet,” said Mr. Maguire, a partner at Global Liquidity Partners LLC, which provides stock-trading algorithms to money managers.
Deepening concerns that the pandemic will damage the world’s economies have sent stocks into a tailspin. A Monday morning selloff earlier this month triggered a circuit breaker that paused trading for 15 minutes—a first since 1997. Trading was halted twice more over the next few days. The major benchmarks, including the Dow, have dropped more than 25% from the record highs they touched in mid-February.
The mass migration of traders from Manhattan offices to their homes and apartments has stirred a range of concerns, from firms’ ability to monitor their employees’ dealings with clients to their appetite to engage as intermediaries and take on risk, investment management executives said.
The Financial Industry Regulatory Authority said last week that financial firms would need to “establish and maintain a supervisory system that is reasonably designed to supervise the activities of each associated person while working from an alternative or remote location during the pandemic.”
“ Back in the day, you might have a broker and three people supporting him, including someone to pick up his laundry. ”
The security industry’s transformation has been happening for years. The rise of computer-driven trading models and funds that track benchmark indexes has helped reshape the way stocks are bought and sold. A wave of electronic exchanges and trading platforms emerged after the Securities and Exchange Commission set new rules in 2005, which eliminated a key advantage floor traders at the New York Stock Exchange and other traditional venues had enjoyed: the right to match any price offered by a rival electronic exchange. As the competition intensified and trade orders scattered, investors’ transaction costs fell substantially.
At the same time, as Wall Street firms were trying to cut costs, regulations imposed in the wake of the financial crisis forced many of the firms to hire workers with different skills.
With the addition of software engineers, compliance staff and other in-demand positions, the securities industry’s total New York City workforce rose to 180,300 last year from 165,900 in 2003, according to the New York State Department of Labor. But the number of employees classified by the department as brokers—or those who serve as intermediaries between buyers and sellers—has dropped to 53,300 from 73,000 in the same period.
“Back in the day, you might have a broker and three people supporting him, including someone to pick up his laundry,” said Michael Karp, chief executive of Options Group, a Wall Street recruitment firm. “But jobs have been eliminated and turned into tech. Today it’s a very different business.”
Traders cheering on the floor of the New York Stock Exchange in March of 1999, as the Dow hit 10000 at the closing bell.
Photo: STAN HONDA/AFP/Getty ImagesCitigroup Inc. slashed hundreds of trading jobs last summer, including some in equities, to account for the shrinking pool of business. Despite a successful initiative to grow the bank’s stock-trading market share, Citi collected $2.91 billion in equity-trading revenue last year, down from $3.13 billion in 2015.
The shift by investors toward lower-cost funds tied to popular stock indexes meant even more of Citi’s trades are sent directly through electronic platforms, which also meant lower commissions on those still executed through Wall Street sales desks.
Stock-trading volumes have surged this month as investors responded to both the deepening health crisis and a host of government policies intended to stabilize the economy. As that flurry subsides and Wall Street assesses fully the damage left by the crisis, many banks, brokers and asset managers may have to make deeper workforce cuts. The market’s relentless digitization may accelerate.
“In a bear market, there’s a spike in trading activity initially, but then you see activity slow down once firms and funds have repositioned their portfolios,” said Brennan Hawken, a financial-services industry analyst with UBS Group AG.
“And then you have all the other pressures that come from an economic downturn,” Mr. Hawken said. “All of these things will lead to a need to push down on expenses. It will be difficult.”
The floor of the New York Stock Exchange in January.
Photo: Kena Betancur/Getty Images—David Benoit contribute to this article
Write to Justin Baer at justin.baer@wsj.com
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