Spare a thought for what is lost with the end of floor share trading in Hong Kong
There is no point trying to resist the inevitable, but the camaraderie and depth of knowledge of traders that brought common sense to the market’s operations disappears along with the closure of the floor
Readers with an aversion to nostalgia might want to pass on this column, but before doing so they might want to pause and consider that some reasons for nostalgia go beyond a mere yearning for the past.
This is a convoluted way of saying how sad it is to see that October 19 marks the end of floor trading on the Hong Kong stock exchange.
One hundred and twenty six years of traditional-style equities trading in Hong Kong has thus come to an end, and the remaining 60 or so dealing desks, catering for no more than 30 floor traders, will, presumably, be dispatched to the big ticker in the sky.
From today onwards, if you want to see the stock exchange in action you will have to be satisfied with blinking numbers and charts on a computer screen. But then again nowadays most market players never go anywhere near the trading floor. They sit glued to their screens and at a click of a button can make trades that were, at one time, scribbled on big boards.
In its heyday the floor was home to over a 1,000 traders, a number that dwindled as computer trading took hold. When the renovated trading hall reopened for business in 2006, only 294 trading desks remained, yet even then as much as 20 per cent of the exchange’s volume was still conducted on the floor. That level of business dwindled to little more than 0.20 per cent of the exchange’s turnover being transacted on a face-to-face basis.
It is therefore hard to argue with the logic of the decision to cease floor trading; indeed most other exchanges have already closed their trading floors as electronic trading rules the roost. Yet, and most notably, the New York exchange remains a holdout and there are no plans to close its rumbustious trading floor.
There are a number of reasons why New York is sticking with floor trading, not least because of the iconic nature of its trading hall and the image it bestows on this exchange.
I remember visiting Hong Kong’s old, and much bigger, trading hall back in the late 1980s when the excitement was palpable. This was just before Ronald Li, the exuberant and, as it turned out, corrupt stock exchange chairman was sent for trial. I am only mildly exaggerating in saying that you could almost smell the money as the traders bustled, shouted and jostled for position. The floor traders in their red numbered jackets rushed around clutching scraps of paper, it looked chaotic but it was not as everyone knew what they were doing.
A visit to the stock exchange floor became a mandatory pit stop for foreign dignitaries who would nod approvingly on being told that the exchange was the epitome of the free market in operation. The scandals, some of which, like the Carrian debacle and the arrest of Li and his colleagues, were much discussed but as long as the market was doing well, nothing else seemed to matter.
The beauty of the trading floor was that everyone knew everyone. A rub of the nose here and a hurried chat there was enough to move share prices as those in the know would swap information with other traders. In a tight spot credit could be given in a matter of minutes and share swaps agreed. It was the kind of thing that gives heartburn to today’s compliance departments.
From the 1990s onwards change came very rapidly as the share market recovered from the great collapse of 1987 and something called red chips became all the vogue, although actual trading in these mainland Chinese company equities was rather muted.
Hong Kong was a relatively tardy adopter of electronic trading, but the old men who had controlled the exchange were being replaced by new brooms who were interested in technology and would preside over the dynamic growth of the market – a market that simply could not have handled the new volume of business using scraps of paper with records that were laboriously entered into computers.
Yet something has been lost, namely the human element in all this trading. The camaraderie and depth of knowledge that resided with the floor traders has been put to one side. Sometimes the old ways were dubious as mistakes were covered up and dodgy information gained currency, but often they worked like a dream as quick action among friends righted mistakes before they got out of hand and rumours were counterbalanced by a deep knowledge of equities, bringing a big dose of common sense to the market’s operations.
There is no point complaining about change or trying to resist the inevitable, but spare a thought for those share warriors in their red jackets.
Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster