NYSE to boost computer server capacity 60%

The New York Stock Exchange, stung by a recent computer slowdown that forced some floor brokers to complete trades by hand, plans to increase its order capacity by more than 60 percent to avoid similar disruptions.
“We will have more server capacity over the next couple of weeks,” NYSE Group Inc. CEO John Thain said in an interview last Wednesday. “It’s a fact of life that message traffic is going to grow, and probably grow quickly, so we have to add more capacity to deal with it.”
The plan may help assure investors that trading systems at the world’s largest stock exchange are resilient enough after its computers jammed during a Feb. 27 selloff in U.S. equities.
Over the next year, Thain said, the NYSE will cut the time it takes to complete a trade at the Big Board by 95 percent to a hundredth of a second as it incorporates technology from its Arca electronic market.
The NYSE embraced electronic trading and transformed into a publicly owned company a year ago with its purchase of Archipelago Holdings Inc., a Chicago-based automated equity market. Thain, 51, is seeking to meet investor demand for split-second electronic transactions, while maintaining the traditional face-to-face haggling that floor brokers say reduces stock prices.
In the final hour of trading Feb. 27, the NYSE’s system that shuttles messages between brokerages was overwhelmed after a computer glitch at Dow Jones & Co. led to a sudden plunge in the value of the Dow Jones Industrial Average.
As electronic orders backed up, some brokers reverted to completing trades by hand as they did a decade ago. The Standard & Poor’s 500 Index fell 3.5 percent, its worse performance in four years.
“One of the biggest selling points of the NYSE is that its trading floor system is especially good at dealing with volatility,” said Benn Steil, director of international economics at the Council on Foreign Relations in New York and an expert on exchanges. “Well, it didn’t appear that was the case last week.”
Two Republican members of the House Financial Services Committee have asked Thain and Richard Zannino, the CEO of Dow Jones & Co., to detail measures taken to correct the computer problems that affected trading last week.
The NYSE already reconfigured the servers of its SuperDot system that sends the messages between brokerages and plans to add capacity over the next “couple of weeks,” Thain said.
Rival Nasdaq Stock Market Inc. also reported problems around the same time, alerting traders at least twice about delays in handling market data. The Chicago-based National Stock Exchange reported intermittent problems completing trades throughout the week. Unlike the NYSE, the National exchange and Nasdaq are fully electronic.
NYSE also plans to add new features to its so-called Hybrid Market that will make it easier for floor traders to interact with orders that stream into the exchange electronically. Hybrid, completed last month, automated many tasks done by floor traders and cut transaction times to three-hundredths of a second from an average of nine seconds.
The exchange will make the system faster by incorporating some of the technology of its Arca market without reducing the role of floor traders, said Thain, who first outlined Hybrid soon after leaving his post as chief operating officer at Goldman Sachs Group Inc. and taking the helm of the NYSE in 2004. The Big Board uses Arca’s order router to connect to rival exchanges.
Last year, as brokerages increasingly relied on automated trading, the ranks of licensed floor brokers declined 16 percent to 1,066, according NYSE data. The NYSE also reduced the size of its lower Manhattan trading floor by about a fifth.