For about 120 years, traders at the American Stock Exchange (Amex) used hand signals to relay information about their trades. But in April 1993 Amex introduced a pilot project to test the use of handheld computers in trading. Previous attempts by the Chicago Board of Trade and by the Chicago Mercantile Exchange were not successful. Amex is using simple, off-the-shelf equipment instead of the highly customized terminals used by the Chicago exchanges. The project was the first in series designed to make Amex a paperless trading floor.

Omer F. Sykan, director of technical planning at Amex, said that the biggest benefit is to get a real-time position analysis to the 462 members of the exchange. Experiments are being done with two different devices. One device is used by market specialists to transmit option trades to a PC-based risk-analysis system. The second device is used for equity (stock) trading.

Wireless technologies are expected to be faster and more cost-effective than hand signals and the paper-andpencil trading mechanism that has been in use for the past 70 years. In the old system, specialists receive orders by hand signals and scribble their trades on an order slip. Then a clerk manually enters the data into the computer. If the markets are moving rapidly, the information that the clerk gathers from the floor is often obsolete by the time it is put into the computers. Handheld devices transmit information instantaneously.

While the devices are extremely easy to use, many traders do not welcome them. “We old guys are faster than most of these computers,” says Jack Maxwell, a veteran of 26 years with Amex. “To hell with it; I don’t need the handhelds.” Attitudes of traders like Maxwell are a big problem facing expanded use of computers. By 1996, the Amex was in the process of implementing the system, first on a voluntary basis.

Questions for Minicase 2

1. As a consultant to Amex, you need to identify the problems of implementing the handheld computers. How would you approach your task?

2. The president of Amex was considering laying off traders like Maxwell. Would you support such a decision or not?

3. Find the status of the computerization that is going on in several stock and commodity exchanges in several countries.

4. How would you convince a trader, who may soon lose his or her job, to use the new device?