20: The Time NYSE Floor Traders Tried to Prank President Reagan

Tracy Alloway (0:07)

Welcome to Odd Lots, I'm Tracy Alloway, Executive Editor of Bloomberg Markets, and I'm sorry, I think I'm sorry, maybe I'm happy. I'm happy to tell you that Joe isn't here with me today because he's having his first baby, and he's on paternity leave. So we wish him the best of luck with that, and we look forward to many Odd Lots podcasts about the market for baby milk formula or diapers. I don't know, it's probably not markets in those.

In the meantime, though, I am joined by a new co-host today, it's Pym Fox. He has his own radio show on Bloomberg Radio called Taking Stock. Say hi, Pym.

Pimm Fox (0:45)

Hello, hi Tracy.

Tracy Alloway (0:47)

Thanks so much for being here today. You are actually the perfect co-host for this subject matter because we are going to be talking about big, big changes in the stock market, right?

Pimm Fox (0:57)

See, I thought you were gonna tell me I was perfect because I was old.

Old, because we talk about stock markets. Of course, stock markets used to work a lot differently even just 10, 15 years ago, never mind 50 years ago. And you have to remember that it's an institution, so a lot of people have that institutional memory.

Tracy Alloway (1:16)

That's right, Pim. I was trying to avoid calling you old, but you went ahead and went there.

We are going to be talking about a specific type of trading today. We are talking about floor trading. We've seen this big debate about computerized high-frequency trading, the changing nature of the stock market, Pim, I know you've been talking about this a lot.

Pimm Fox (1:35)

Yeah, well, of course, it's a very popular topic, you know, HFT, high-frequency trading, whether they add liquidity, whether they're really in it. But one of the things I think is useful just to keep in mind is kind of what purpose, what role does a floor trader, or just let's say trader, actually play? They are in the middle of a transaction, and we know that they've been sort of, oh, they're the bookie man, they're the terrible things in the world. Middlemen, let's get rid of them, it may cost less if we get rid of them. But middlemen, I believe they serve a purpose, and they have historically served a purpose, and well, we're gonna learn a lot about it today.

Tracy Alloway (2:13)

Yeah, and on that note, we are going to roll a little clip for our listeners right now, and they can learn more about what a floor trader actually does.

SPEAKER_3 (2:21)

Starting with a quick rundown on the men who transact your everyday business on the floor.

These member floor brokers, for instance, who are usually partners in the member firms, trading for you at the post where the stock you want to buy or sell is assigned. The specialist, whom you can pick out because he frequently refers to this book, and the broker's clerk whose telephone links the floor through the order room to the man you know best, your own broker. Because you and he are both professionals, your member broker can help you make the best use of the market in carrying out your investment decisions. Suppose you had an order of moderate size. It could be handled all at once, or in a flow in, flow out series of transactions.

Tracy Alloway (3:08)

Pym, what did you think of that?

Pimm Fox (3:10)

I think, I don't know whether it accurately captured the energy, but well, being on a floor, you got to understand it's crowded. There are a lot of people, there's a lot of noise, or at least they used to be. I mean, the floor of the NYSE has gotten smaller, smaller, smaller.

They got an options pit, but even in Chicago, they've gotten away from a lot of the sort of traditional images of people shouting back and forth.

Tracy Alloway (3:32)

Yeah, this is the open outcry system where people use sort of all this industry jargon and hand signals. Very animated sort of trading, which is really dying out now. It's kind of sad in my mind.

Pimm Fox (3:46)

Well, it's for the history books, you know, or for movies.

Tracy Alloway (3:49)

All right, well, here with us today to talk about the history of floor trading, as well as its future, we have Keith Bliss from Katone & Co. Inc. He is an actual floor trader, and he joins us today in studio.

Keith Bliss (4:02)

Thank you, Tracy. Good to be with you.

Tracy Alloway (4:03)

So maybe just to begin, we've touched on it a little, but could you give us an idea of what a floor trader actually does?