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NYSE and AMEX: Wireless Trading Catches Up with Stock and Option Traders

Stock and option trading is a venerable institution - some stock exchanges are centuries old, as is the practice of writing option contracts. Today, while trading's importance to the world economy is monumental, traders still make transactions by shouting, waving, and scribbling notes on slips of paper. At the NYSE and the AMEX, the shouting and waving may go on, but these exchanges will soon trade paper notes for the speed and reliability of wireless networks.

Application: Tracking and Facilitating Transactions on the Exchange Floor
The wireless networks at the NYSE and the AMEX will extend networking technology into places where no network was possible before. Both the NYSE and the AMEX already have phone and wired computer networks that allow clerks in the booths above the exchange floor to communicate with the outside, say a brokerage's main office. When orders reach the clerks, however, they reach the end of the wired road. The clerks write each order on a ticket, which a runner then takes to the appropriate broker on the floor. Once the broker makes the transaction - either through another broker ready to buy or sell or through a "market maker" - he or she records the transaction and gives the receipt to a runner; the runner brings it to a clerk, and the clerk enters the transaction information on a computer for relay back to the main office or transaction clearing partner.

Now the NYSE and the AMEX are developing a wireless backbone that will replace the runners and paper tickets between the clerks and the brokers with hand-held wireless computers. Both systems will be available for use by any member firm. When the NYSE infrastructure is complete, any member firm will be able to use it to transmit information directly between their clerks in the booths and the traders on the floor. Says Robert Britz, NYSE group executive vice president, equities, "The system will complete the loop of technological enhancement that the NYSE has been implementing over the past two years." AMEX rules will allow direct wireless communication between traders and their brokerages or clearing partners outside the exchange. In both exchanges, transactions will be recorded as they happen, speeding up the entire trading process and paving the way for an array of benefits to firms, their clients, and the exchanges.

Benefits: Speedier, Higher Quality Information Both to and from the Floor
The wireless networks at the NYSE and the AMEX will give brokers instant access to proprietary information. Instant number-crunching power will be another important benefit: On their hand-held computers, traders can even run proprietary algorithms and run what-if scenarios right on the floor - a crucial advantage in the volatile world of option trading, where traders make huge buying and selling decisions on price shifts of mere pennies and timing is even more crucial than in securities trading.

And with transactions entering the system instantly, brokers and traders will be able to make better decisions. Under the old system, analyticals (the information on share prices and underlying variables that indicates the price levels at which options should trade) were manually updated, a process that took 24 hours or more. With the new system, option traders will always have up-to-the-minute analyticals at their fingertips.

Other benefits of the wireless network include the reliability and accountability it will lend to transactions. Because transactions are made and recorded all in one step, they won't get lost. And because every step of every transaction takes place electronically, auditors will be able to follow an audit trail through the network for any transaction at any time. Thus the wireless networks will allow the exchanges to implement a level of oversight that wasn't possible before.

Installation Size
NYSE: With its first broker on-line at the end of 1996, the NYSE has scheduled its wireless system for full rollout in the second half of 1997. The system will ultimately help bring more than 1,300 traders and NYSE staff members on-line by providing them with hand-held computers equipped with wireless cards that connect them to the wired network.

AMEX: AMEX is installing access points; this wireless infrastructure will serve 200 AMEX personnel and 1,000 individual firms and traders, who will supply their own hand-held computers and wireless cards.

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