Execs defend humans in high-tech markets

NEW YORK (Reuters) - The heads of the world's biggest stock exchanges agree there is still room for the "human element" in a high-speed trading environment that has aggressively gone electronic.

The New York Stock Exchange's landmark trading floor on Wall Street -- the symbol of U.S. capitalism that is occasionally teased for its low-tech nature -- received some praise from its owner and competitors alike at the Reuters Exchanges and Trading Summit in New York this week.

NYSE Euronext (NYX.N) Chief Executive Officer Duncan Niederauer said the number of specialists and brokers on the floor would "probably never" dwindle to nothing, while others said recent volatility and the increasingly complex investment products hitting markets require a human touch.

"There are a lot of clients that like to use the trading floor. They like the human element of trade. They like to pick up a phone and talk with a broker and try to get some color on the market," said Terry Duffy, executive chairman of CME Group CME.N, the world's top futures exchange.

"And then there is obviously the rest of the world who likes to trade by electronic trading," said Duffy.

Automated trading has bloomed over the last two decades as more investors with more capital demand quicker and easier ways to invest in global equities.

As a result, the ranks have thinned among those working the New York trading floor, founded more than 200 years ago.

HUMAN JUDGMENT

Niederauer said the population of those connecting buyers and sellers could decline by another 20 percent by the end of the year, excluding staffers at the American Stock Exchange, which the NYSE is in the process of acquiring.

But he pointed to the sharp equity-market drops last summer and earlier this year as evidence the experience of human market-makers is necessary.

"When you get into volatile periods like that, people want to use the floor or they want to get human judgment involved, or they want to use the experts," he said.

Electronic trading networks such as BIDS Trading LP, a joint venture between the NYSE and a consortium of U.S. firms, give clients the option of either negotiating their large-block orders, or matching them electronically.

"If you look at some difficult trades ... where there's something unusual happening, human intervention is invaluable," said BIDS CEO Tim Mahoney.

"I wouldn't discount the floor brokers, or the existence of the floor," Mahoney said.

The branding element of NYSE's floor -- which appears worldwide on media broadcasts to illustrate virtually anything related to financial markets -- may be its most valuable feature.

That partly explains why the president of Nasdaq OMX Group (NDAQ.O), the all-electronic competitor to NYSE Euronext at the top of the exchanges industry, said it is looking for other ways to increase its visibility worldwide.

But asked what he would do if Nasdaq OMX owned archrival NYSE Euronext's high-profile trading floor on Wall Street, Magnus Bocker said: "It would be beautiful for condos."

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Jonathan Spicer; Editing by Tim Dobbyn)