Seeking to maintain its preeminent position among the stock markets of the world, the New York Stock Exchange is nearing completion of a $125 million overhaul of its trading operations.

The massive retooling of the exchange's frenetic trading floor in the heart of Wall Street represents the culmination of three years of planning and testing by the exchange, its brokerage firm members, and its wholly owned technology subsidiary, the Securities Industry Automation Corp.

The purpose: to use some of the latest computer technologies available to better manage ever-mushrooming trading volumes and to be able to significantly increase the number of listed companies.

At the same time, stock exchange officials were adamant about preserving the tradition of face-to-face interaction between buyers and sellers of stocks, a hallmark of the exchange for over two centuries.

The project also marks one of most ambitious and highest-profile installations to date in the financial services industry of a processing scheme known as client/server computing, where networks of distributed computers share data and application software, thus limiting the reliance on centralized mainframe systems.

Starting early this year, with only weekends available for the massive changeover, the exchange installed 450 "server" computers and 2,500 "client" workstations from Hewlett Packard Co. for use by the exchange's market makers, called specialists, who act as traffic cops between buyers and sellers.

The HP hardware uses a version of the Unix operating system, software that has become the standard in client/server computing on Wall Street.

The 19 specialist posts are also equipped with 2,000 high-tech flat- panel color display terminals from Pixelvison Inc., Acton, Mass. These displays take up significantly less space than the previous equipment and allow more information to been shown on a single screen, stock exchange officials said.

While retail banks have been somewhat slow to adopt wide-scale client/server systems, except for relatively simple processing tasks like branch automation, Wall Street has been relentlessly pushing the envelope, consultants say.

"Client/server has a much stronger history in trading rooms because of the high value of the transactions flowing through them," said Bob Landry, a consultant with the Tower Group in Wellesley, Mass. He noted the still relatively high cost of distributed systems, compared with mainframe-only processing. "For Wall Street, it's a different economic scenario."

New York Stock Exchange officials said client/server's modular design was what sold them on the technology. "We wanted to be able to quickly respond to the needs of our users on the trading floor, in terms of listing more stocks or adding new products," said Catherine McKinney, executive vice president at the exchange. "We felt the structure and architecture of the client/server environment was much more responsive to competitive changes."

While exchange officials were willing to install leading-edge technologies as part of its upgrade, modifying its hallowed tradition of personal contact between brokers and specialists was not a consideration.

This approach is in marked contrast with its chief U.S. rival, the Nasdaq over-the-counter market, where the brokers themselves quote prices that are then electronically distributed to other market participants.

While some critics have charged that the specialist system at the New York Stock Exchange is a relic of a green-eyeshade past, Nasdaq's dealer- based electronic market has also come under fire recently, mainly concerning the often wide spreads in its listed stocks. Spreads are the difference between the prices at which a broker will buy or sell a particular security.

"We're convinced that with the specialist system we have the best pricing mechanism for investors, and what we wanted to was upgrade the technology to support that mechanism," Ms. McKinney said. "It's important to remember that we have 51 million individual investors and 2,600 listed companies. A lot of emerging and evolving marketplaces don't have those kinds of attributes."

Ruann F. Ernst, general manager of Hewlett-Packard's financial services business unit, concurred with that assessment, though her firm has also worked with stock exchanges in Asia and Europe to install "floorless" trading systems where computers, not people, match up buyers and sellers.

"But those exchanges are generally in emerging markets with little or no previously existing technology," Ms. Ernst said, adding that it was actually more of a challenge to help design a client system that supported the vast knowledge and hair-trigger instincts of the seasoned brokers and specialists who work on the New York Stock Exchange.

The new system was also designed with expansion in mind. Ms. McKinney said the new trading floor automation can handle volumes of up to two billion shares per day, a 43% increase over the previous system's capacity.

System reliability was also a significant issue, as some technologists continue to question whether client systems are truly "industrial strength."

"We have an excellent up-time record, and we needed to maintain that," Ms. McKinney said. "So we structured the client system to be as fault tolerant as we can make it, with a lot of redundancy built in."

Ms. McKinney said the upgrade is about three-quarters completed, with systems for the broker's desks that surround the trading floor to be installed next year.

As part of this last phase of the project, the exchange will provide brokers with wireless hand-held computers so they can receive and confirm orders coming from their trading desks.

"We did this part last because some of the technologies in the wireless arena are a little less mature, and we wanted to give ourselves as much time as we could to let the market catch up with our needs," Ms. McKinney said.

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