Philadelphia Stock Market Essay
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During the early 1965’s the volume of trade and investment within the U. S. market was increasing and as the amount of business on the Philadelphia Stock Exchange was escalating, in order to attract the traders in large amounts the Philadelphia Stock Exchange had to alter its rules in order to permit the commissions to be shared with brokerage firms that were not members of the Philadelphia Stock Exchange.
In order to attract the order flow from the up and coming discount brokers, the Philadelphia Stock Exchange had to present computerized, consistent executions at costs close to the best prices which were available anywhere.
In order to so, the Philadelphia Stock Exchange in the year had to introduce an automated order handling and execution system. This system was called PACE. The function of this system was to route a retail order to the proper specialist. Orders that met predetermined criteria could be executed automatic ally by the specialist.
In response to the automation process of the retail ordering flow with the help of many of the regional exchanges and other third party dealers, the New York Stock Exchange also automated much of its system.
However, PACE had succeeded in attracting a large number of traders by then and there were a huge volume of retails orders flowing into the Philadelphia Stock Exchange. However, the Philadelphia Stock Exchange continued to lose market share as large institutional orders returned to the NYSE following the 1975 deregulation of – – fixed trading commissions.
As the costs of the communication fell during the middle of the 19th century, the various stock exchanges across the world that were situated in dissimilar in different demographic regions started to fight with each other. At a range of points, the Philadelphia Stock Exchange effectively raced for higher numbers of retail order flow against the much larger New York Stock Exchange. This was done by listing the firms which were not able to get themselves listed on the New York Stock Exchange and by giving an opportunity to brokerage firms that could not find the money for membership in the NYSE.
Also the Philadelphia Stock Exchange altered its rules in order to attract more trade from firms that were looking to compensate those brokerage firms for mutual funds or to avoid the high fixed commissions that prevailed prior to 1975, and by offering fast automated executions for discount brokers. The Philadelphia Stock Exchange also competed with larger exchanges by creating a new product, currency options, that enabled firms to hedge unwanted risks. The management of the Philadelphia Stock Exchange is deeply conscious that the blood thirsty and ever more computerized trading environment that has been emerging lately.
The Philadelphia Stock Exchange Management has declared that it looks for better strategic partnerships, and conceivably mergers. “ We are looking for automated trading platforms and other exchanges as the best way to continue to attract the order flow and the technology that will enable the Philadelphia Stock Exchange to compete successfully in tile future. As part of this strategy, Philadelphia Stock Exchange is in the process of converting from a mutual institution to a for-profit stock corporation. Until recently, all securities exchanges in the U. S. ere set up as mutual organizations, meaning that the members of the exchange were also its owners with the right”, Ziegler, MD Operations.
Philadelphia Stock Exchange is the first security exchange in the United States and the custom of tradition that has typified this exchange has been passed on as the years with the evolvement of the Exchange. The Philadelphia Stock Exchange has modified in an extensive manner and has continually met the growing needs of the investment clientage over the years. Since the Philadelphia Stock Exchange was the first to be completely organized as the first U.
S. Stock exchange market, it was also the “First” in a number of other things. These issues have made a clear impact over the electronic industry in relation to the security development issues. Philadelphia Stock Exchange was the first stock exchange al across the globe to enter the internet world with its own website. “The Exchange believes in building carrier class enterprise infrastructure capable of delivering five nines performance. The nature of our business and the needs of our customers demand unparalleled network resiliency without sacrificing the management and maintenance simplicity our IT staff requires”.
Frank ziegler vice President, Philadelphia stock Exchange. The Philadelphia Stock Exchange in its early years was facing a problem with the issue of complete change to an electronic form of trade. The need was to evolve from the conventional style of trading to a more modernized electronic trading environment. This was aimed to outperform the competitors. At the same time the Philadelphia Stock Exchange management committee was taking steps to ensure that the move resulted in the most advantageous application performance, negligible latency, and observance with governmental regulations (Regulation NMS).
For the Philadelphia Stock Exchange to remain in the fast growing competitive world of investment and trade and also to continue with the structuring of the Exchange’s innovative use of technology, the Philadelphia Stock Exchange wanted to move to an electronic form as stated above. This would capture more volume of trading from the investors at any point of time due to the easy accessibility and mode of operation and the traders on various other competitors.
The Philadelphia Stock Exchange supported by an electronic model can place a considerable large amount of demand on the trading network delivering the applications, and the opportunity losses due to inadequate network and application performance can be huge. ln addition, the Philadelphia Stock Exchange was seeking a model that could help them to distribute and publish real time market information and reports, community quotes and other important pieces of information to the investment markets both the national and international within a small time frame.
At the same time it was looking to meet the demands for increased capacity to keep up with exponential growth of the industry’s real-time quote feeds. This would mean that the network of the Philadelphia Stock Exchange network would have to go through a number of changes in order to meet the next scene of the financial world stage market and thereby create a higher level of competition leverage for the different market players in this segment.
The new change would have to offer a higher business and trading speed to the traders of the exchange in order to prove the competitiveness of the new system and at the same time supporting the growing business needs for mounting business risks. Before stepping into the digital world the Philadelphia Stock Exchange, was working in a single information centre that was supported by every regional and national centre and data base carrier. Micheal Bay, Chief operating office, Operations, said, “ In order to support an electronic trading model, an expanded network needed to be in place.
This would put the applications closer to the traders in the metropolitan New York area, thereby ensuring reduced application latency and network performance interruptions. The Philadelphia Stock Exchange system was implemented with the solution that could provide a revised set of market stretched rules which were made and designed keeping in new an efficient, fair and orderly exchange market system. This market exchange worked in association with the technology in order to increase the trade volume.
While conformity with these new technologies is identical with infrastructure competent of offering high-speed act, the aptitude to send high application accessibility and system uptime can actually become a competitive differentiator. The Exchange’s point of reference target was to make available quality of implementation reports for equity transactions in less than 5 milliseconds, end-to-end round-trip time from its new all-electronic equity trading platform, at Philadelphia Stock Exchange.