What we need is robots

Or at least computers to execute our trades on the floor of the New York Stock Exchange. Although at this point I'm sure a lot of people would settle for "specialists" who don't engage in shifty trading of the sort charged against 15 floor traders yesterday.

The real significance of this story is not that there are allegedly criminals gaming the markets. That's old news. This story is interesting because it comes at a very awkward time for the NYSE. Under assault from electronic markets such as the NASDAQ, the NYSE has been fighting to preserve its antiquated but highly profitable specialist system, in which living, breathing (and now, apparently, cheating) human beings manage continuous auctions for shares in listed companies. Antiquated because in the face of the NASDAQ system and others like it, the NYSE is slow and inefficient. Highly profitable because the specialists take a cut of every transaction in fees, so those positions are very lucrative and brokerages are willing to pay the exchange a lot for the privilege of holding them.

The argument, a growing body of evidence to the contrary, is that human specialists are somehow better at matching up buyers and sellers quickly. But this sounds ever more dubious in the face of NASDAQ's ever more sophisticated technology. Meanwhile, the NYSE's trade-through rule, only recently extended to other markets, deprives traders of the level of choice about execution that NASDAQ offers.

Faced with these shifts in the market, any company listed on the NYSE would have to adapt or die. Which makes the exchange's resistance to change somewhat ironic. And as good a place to start on this Wednesday morning as any.