US exchanges take another small step online

Professional traders at the three top US financial exchanges are taking another reluctant step towards electronic trading.

Under heavy pressure, the New York Stock Exchange is to lift the limit of 1,099 shares per electronic trade and cut the 30 seconds that traders must wait between electronic trades.

It is the last stock exchange in the world to effectively rely on person-to-person transactions – only 6 per cent of its trades are electronic. But it has been under heavy pressure to change in the aftermath of a string of insider-trading scandals that are still being uncovered.

This is the exchange’s own voluntary step before being pushed by the US watchdog the Securities and Exchanges Commission.

In Chicago, it is foreign competition that is driving the two futures exchanges to go electronic. Eurex, the German-Swiss futures exchange, has won regulatory approval for the launch of a US-based operation.

This will break the two Chicago exchanges’ virtual monopoly in the market for US treasury bonds and open up trade in European futures to US customers.

The Chicago exchanges are fighting back by slashing charges and going electronic. In reaction to the Eurex threat, they have already moved around 80 per cent of their treasury trades to electronic systems.

And they are carrying the battle to Europe by planning an offering of the European bond futures that are Eurex’ speciality. They will, however, be using a system from Eurex’ Paris-based rival, Euronext.