July 14, 2008

The information content of trading floor photos

Posted by Arcane Gazebo at July 14, 2008 5:42 PM

I've been noticing lately that whenever the New York Times runs a market-related story, they always include a photo of traders at the relevant exchange looking troubled and/or frantic. (Today's example is here.) This raises a number of questions:

  • Given that all these photos are basically the same, do they actually go to the floor and take new ones each time or just post from a collection of stock photos?
  • And isn't it likely that floor traders always look like this, not just when something newsworthy happens?
  • What will the journalists do when the exchange floor closes entirely as a result of the shift towards electronic trading? (Probably just keep using the stock photos.)
  • If only there were a more informative graphic they could fill the space with... if there were an "index" reflecting recent market movement that could be plotted as a function of time. Someone should invent something like that.
  • Instead of complaining about lame photos in the NYT, shouldn't I just subscribe to the Wall Street Journal like everyone else in the industry?
  • Or has Rupert Murdoch already turned it into the financial equivalent of the New York Post or Fox News?

Tags: Finance

Actually, you should subscribe to the Financial Times.

Posted by: Andy | July 14, 2008 6:19 PM

I remember visiting the NYSE a number of times when the visitors' gallery was still open. You could toss a note to one of the traders on the floor. If I remember correctly, particular trades took place at particular stations. Parts of the floor were pretty quiet, but here and there clusters of traders, often centered around a specialist were frantic. In contrast, the bond trading annex was a mausoleum reflecting the relative lack of liquidity in corporate bonds.

It wouldn't be too hard to build a map of the trading floor, either based on the existing trading layout, or just making up a thematic layout. Then, you could track the ticker and have little avatars or SIMs clustering around areas of higher volume. You might even have some indicator for upticks against downticks. I suppose such a chart might even be useful if you had the stations reflect industry sectors, or perhaps market eigenvectors if you wanted to generalize.

As for the Wall Street Journal, it is changing, as judged by the online edition. It is still fairly useful, and its market coverage is still good, but it is accruing more and more lifestyle stuff and related fluff. The editorial section is almost hilariously, or perhaps pathetically, out of touch with reality. Do they even read their own paper? The FT is probably a better choice.

Yes, I think it is a good idea to be concerned with lame market floor stock photos. When an industry starts making a fetish its past, it deals poorly with the present and has lots its path to the future. Look at Detroit and its muscle car fetish. Look at all those fake home and farm pictures on food products. Watch Goodbye Lenin, and see if you get the same uncomfortable feeling.

I remember the 1960s when the back rooms were the problem. It started to take more than a day just to process the paperwork for all the trading. They actually cut exchange hours on high volume days. Then, the back rooms computerized. Now the exchange itself is computerized. I don't even know how much of the NYSE volume even comes to the floor. Like the TSA, the NYSE is more concerned with symbolism than with what it actually does.

Of course, I do miss the old brokerage houses that my dad used to hang out at. They had the tickers crawling across the wall, certain indices and high volume stocks clacked their updates electromagnetically and the news wires were purple ink crawls on inset projection screens. If you wanted a quote, you could wait for a trade, and hope you caught it as it slid by. Otherwise, you could ask one of the brokers who might ask one of the other brokers who was following that stock. There was usually a handful of regulars, mainly men, who sat watching the show, kibbutzing and kvetching as if they were at a ball game. When the first Quotron units came out, even I as a kid could sense that something was changing.

JP Morgan, they say, experienced the Civil War from the Wall Street end of a telegraph line. The technology changes, but don't let that confuse you. The game of the bulls and bears is not all that different than it was in the 17th century.

Posted by: Kaleberg | July 14, 2008 8:44 PM

You should definitely watch Goodbye Lenin if you haven't already. It's an excellent film.

With what operator do these eigenvectors go? (I have seen economists use eigenvector centrality before, though for an entirely different application.)

Posted by: Mason | July 15, 2008 2:33 AM

I used to hang around with a bunch of guys who used eigenvectors as a cheap way to extract a "meaningful" subspace. They'd typically compute or track a correlation matrix and extract its eigenvectors to try to group the correlations. For example, if you have a hyperspectral dataset (an image with a full spectrum for each pixel) you'd find a lot of cross wavelength correlation. If you took the eigenvectors of the correlation matrix you could discard the eigenvectors with the smallest eigenvalues and build a smaller subspace image with, supposedly, fewer values per pixel, but more meaning per value.

Sometimes it even worked.

In finance, you might correlate stock trades over a period of time and do a similar reduction. Again, it might provide more meaning.

Posted by: Kaleberg | July 20, 2008 8:51 PM
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