Brandy Patterson is managing director for NYSE Arca and NYSE Amex, the two options exchange arms of NYSE Euronext. She is in charge of electronic trading and client support for those exchanges. She spoke with Sarah Rudolph about the transition from floor to electronic trading, the challenges of running two electronic exchanges, and what’s ahead for Arca and Amex.
Q: You started out on the floor of the Pacific Stock Exchange (now Arca) in 1998. What was your personal experience in making the transition from floor trading to electronic trading of options?
A: I didn’t set out to get into this business. I was always into web design. I have an art degree, so I was more into the computer side of things. I was on the floor for about a year, and then I moved to the back office to see how the systems worked. I was still supporting the floor, but more of my work involved supporting the electronic trading for the floor traders.
When market makers were able to send in quotes, that was something I jumped into right away – helping them check their quotes. And the business kept moving in that direction. I like to learn new things and it was fascinating looking at that stuff. Even though systems are much faster now than they were back then, it was amazing at the time how fast they were. Back then we had a trading system called POETS. We would process quotes from market makers coming in, and if they had a problem I would check their quotes to see if there was an issue with the way they sent it to us. Over time I developed a lot of relationships with the firms I worked with.
I’m not a programmer, but I do a lot of work on the computer.
Q: Could you describe the work you do with clients at NYSE Arca and NYSE Amex?
A: I support both order flow market makers and any person who comes into the exchange. It could be order entry, it could be quotes. I support the floor too, but we have additional floor support. I make sure the order was sent in correctly, that it is priced correctly, and help to determine if a trade is erroneous whether it gets busted or adjusted, price improved. That’s the electronic part. I also answer any questions that come up on the various order types we offer and the different functions that firms are using, to help them use the system better. We do have a lot of order types that firms aren’t always aware of.
Q: What is the biggest challenge in running an electronic options exchange?
A: With any exchange, it is probably fighting for speed, to be fastest. Lately it’s also all keeping firms happy with pricing, because that’s always changing, and maintaining market share.
Q: What changes are ahead for Arca and Amex?
A: We’re currently working on our crossing mechanism. That will be happening in the last quarter of 2010. Along with the crossing mechanism, we’re putting in a complex auction. We have a complex currently, but we don’t have an auction with it.
For a complex auction, you can send in your order and tag it that you want it to be an auction order. Currently, your order sits in the complex book and it takes another order to interact with it. That information does go over the Arca Book, but we don’t have an auction that goes along with it. That will be coming by the end of the year, and the crossing will go in at the same time.
Q: The Amex market share in particular has grown quite a bit in the past year. To what can we attribute that?
A: A lot of it is the technology. The technology is very good and pretty fast. We moved everything to the OX technology in 2009, after acquiring it in 2008. We use the OX technology for both options platforms. (We put Arca on that technology back in 2006.)
We have the traditional SRO on Amex, similar to the CBOE, and then we have the price time model with Arca. A lot of firms prefer the traditional options model, so that has helped Amex.
Q: It helps to provide both, the two exchanges?
A: Yes. High frequency firms tend to like the Arca model, and some like the traditional Amex pro-rata model — and payment for order flow. (We have payment for order flow on Arca, but only on the non-penny names. Market share on non-penny names is not as large.)
Q: What is the status of the penny roll out?
A: We are done with the penny roll out. We have a total of 363 names on the list, which can be found at http://www.nyse.com/pdfs/Penny%20Pilot%20list%20as%20of%20August%202%202010_363.pdf
Q: You recently joined Women In Listed Derivatives (WILD)?
A: Yes. I’m planning to attend the WILD function in September. I think it’s a great idea because there aren’t a lot of women in the space.
Q: Have things changed a lot for women since you started out on the floor?
A: I think they have. Back when I was on the floor, you had to work a little harder to get your thoughts heard. Especially on the floor, they didn’t necessarily take you very seriously. I think women in the industry are taken more seriously now. I hope they don’t call women “floor girls” anymore!
Q: What do you enjoy most about your work?
It has been a fun ride and I’m still on it. It has been great seeing how we’ve progressed from not being electronic to taking it all electronic, acquiring AMEX and turning that into an electronic exchange. It’s exciting being a part of making it all happen.