NYSE to eliminate 17% of its workforce

The company that owns the New York Stock Exchange said Wednesday that it would slash its workforce by 17%, a sign that the rise of automated trading is reducing the role of old-fashioned floor trading.

NYSE Group Inc. said it would eliminate 520 positions from its roughly 3,000-person workforce over the next five months. The announcement came a week after the exchange said it would shut down part of its famed Lower Manhattan trading floor to cut costs.

The consolidation moves underscore the rapid changes taking place at the Big Board.

Since becoming a for-profit company this year, NYSE Group has sought to acquire competitors and wring out excess costs.

The NYSE also is steadily embracing electronic trading to compete with domestic and international rivals that already rely on computers. The NYSE bought Archipelago Holdings Inc. this year and introduced a revamped electronic trading system last month.

“They are on their way toward becoming an electronic exchange, and electronic exchanges need much less personnel,” said Thomas Peterffy, chief executive of Interactive Brokers, an institutional trading firm in Greenwich, Conn. “It’s a shock to the employees, but it’s good news to the world because trading will become faster and cheaper.”

The NYSE said it was immediately eliminating the jobs of 400 employees and 120 full-time consultants. The reductions would occur entirely in its market-operations unit, with none coming from its regulatory arm, which monitors the brokerages that trade on its floor. About 150 jobs will move to the American Stock Exchange as part of a deal this month in which the NYSE bought the Amex’s stake in an inter-market trading system.

Combined with earlier cuts, the NYSE and Archipelago have reduced their combined workforces 27% in the last 18 months.

Since becoming a public company this year, the NYSE has come under the same profit expectations as the companies that list on its market.

“When you go for-profit, you say to yourself, ‘Do we need all that space, do we need all those people?’ ” said Michael Pagano, associate finance professor at the Villanova University School of Business.

NYSE Group is under particular pressure to keep its stock up as it seeks to buy European stock-market operator Euronext. On Wednesday, NYSE shares rose 48 cents to $82.51.

NYSE Group said last week that it would close one of its five trading rooms in the next 18 months because of improvements in technology and automaton. Some observers think further reductions in trading space and employee headcount will follow.

In a speech last week, NYSE Chief Executive John Thain said that although stocks of big companies would increasingly be traded electronically, human traders would still be needed to ensure a steady market for companies that are less actively traded.