Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, August 13, 1994                   TAG: 9408160030
SECTION: BUSINESS                    PAGE: A-6   EDITION: METRO 
SOURCE: 
DATELINE: NEW YORK                                  LENGTH: Medium

FACING REALITY AT BIG BOARD: COMPUTER FACELIFT FOR NYSE

Big Board officials, worried about incursions on their turf by the Nasdaq stock market and other computerized interlopers, have announced a $125 million system of new computers that will cut down on human interaction but make for more efficient, speedy and accurate stock trading.

The new electronics should be fully installed by 1996. But for television-news viewers accustomed to images of stockbrokers scrambling to a floor phone, some changes already are visible.

Brokers and specialists at the exchange - market makers who match buyers and sellers - are using cellular phone headsets to communicate from any point on the floor. Monitors suspended from the cavernous room's ceiling and at trading booths are being replaced with ones that take up less room but beam crisper pictures crammed with more information about stocks.

And new electronic links allow brokerage firms to instantaneously communicate their orders to brokers on the floor.

By 1996, the exchange plans to distribute hand-held computers to brokers for receiving orders and reporting trades - while remaining at floor auction sites. Exchange officials say the changes, when all in place, will further automate the world's biggest daily auction of stocks without taking away the important human element, which presumably gives all participants the same opportunity to make offers to buy and sell stocks.

The new investment follows $1 billion in new technology over the last 12 years. That has led to productivity improvements, allowing the exchange to pare its operations staff by 37 percent to 500 since 1988.

``We view technology as the servant of the human judgment and not as the replacement of the individual,'' said William Donaldson, chairman of the exchange.

``We believe the auction process must function with a human on both sides.''

Exchange officials tout this quality as giving the NYSE an important edge over rival exchanges that are more fully electronic and allow buyers and sellers to communicate from their offices via computer. The Nasdaq stock market is the best-known computerized stock market.

But some critics say the NYSE is trying to keep itself from becoming obsolete by giving new tools to potentially outdated intermediaries in stock deals - floor brokers working for brokerage houses.

``It is attempting to perpetuate the manual procedures that have been in place for 100 years or more by putting a facade of technology on top of them,'' said Junius Peake, professor of finance at the University of Northern Colorado who has studied electronic stock markets.

Computerization of stock trades has allowed rival exchanges to chip away at the Big Board's share of business in NYSE stock.

While the NYSE's share of total transactions grew to 70.5 percent last year from 65 percent in 1992, it still was sharply down from 77.7 percent in 1983. The Nasdaq stock market, meanwhile, increased its share to 9.6 percent from 1.3 percent.

``The New York Stock Exchange has been losing market share to other systems and hasn't been gaining as much as they've wanted to and has been the subject of a fair amount of criticism,'' Peake said.