NYSE’s Lynn Martin Keeps Eye on System Capacity
Lynn Martin, president of NYSE Group and chair, ICE Fixed Income and Data, said that one of the first things she focussed on when she took on her current role was system capacity.
Martin was interviewed on the Bloomberg podcast, Masters in Business, by Barry Ritholtz, co-founder, chairman, and chief investment officer of Ritholtz Wealth Management.
Martin took over from Stacey Cunningham, the first female president of the NYSE, in January this year. She leads the NYSE Group, which includes NYSE and four fully electronic stock exchanges — NYSE Arca, the industry leader in ETFs, NYSE American, NYSE Chicago and NYSE National — and two options exchanges, NYSE American Options in New York and NYSE Arca Options in San Francisco. Previously Martin was president of fixed income & data services at Intercontinental Exchange, NYSE’s parent company.
Martin said that one of the first things she thought about in her new role were the average response time and capacity in the system to handle peak days as there were signs that volatility was starting to creep into the market last December.
“I’m glad I did because a couple of weeks after that we had tremendous volatility around the week of January 24 and 25,” Martin added.
As volatility increased, NYSE started to see days where messaging volume was m more than 20% above pandemic levels with half a trillion messages being processed daily.
“We were processing those with average response times in the stocks of about 30 microseconds which is tremendous,” Martin said. “Our technologists have done a great job as we recently upgraded our systems to our next generation matching engine technology and our systems have ‘touch wood’ held up beautifully from a response time standpoint.”
Martin believes the NYSE’s market model helps listed companies have a less volatile experience as the exchange has designated market makers on the floor whose job is trade that stock and maintain an orderly market.
“They smooth that volatility intraday but also at the open and the close which are incredibly important moments in time for a company” she said.
This model has meant that the NYSE has had two times less volatility at the open and three times less volatility at the close in the exchange’s listed stocks this year according to Martin.
She continued that the most technologically advanced companies employ humans to apply judgement and remove noise from the system. For example, when writing code and an error occurs, a human is needed to fix the problem.
“It’s something that I employed in my previous role where we valued 2.8 million securities in the opaque fixed income market,” she said.
Martin argued that one of the reasons that ICE has the best fixed income data is because it employs former bond traders and municipal bond specialists who can make sense of the information coming into the system.
“I think the floor model is doing exactly the same thing on really volatile days,” she added.
She also believes NYSE will continue to be a physical exchange at the corner of Wall Street and Broad Street.
“We’ve been here for 230 years and you can count on us being here for the next 230 years,” Martin said.
NYSE aims to be a good partner to listed companies and what it is seeking to achieve in its multi-year strategy.
Martin said: “It’s not just about the IPO day. I equate that to a wedding day – you’re going to have a great day.”
A listed company may want to raise capital to fund operations, for research or to make acquisitions.
“One topic that CEOs are very focused on at the moment is their environmental, social and governance strategy and how they are bringing sustainable practices to the market,” Martin added. “So they want to tell that story.”
Last year many SPACs, special purpose acquisition companies, listed but their stock price has performed poorly. Martin argued that SPACs are still a viable form for companies to go public as the structure has been in use for 15 to 20 years.
“You saw a flood of SPACS coming to the market at the same time last year which may have contributed to some of the challenges that we now have,” she said.
She continued that NYSE was proud of pioneering direct listings as it was an innovation that allowed private companies to list without raising capital.
“They could become public companies and have that public currency to fund their operations or do M&A as well providing investors the opportunity to participate in the upside associated with the company,” Martin added.
The first direct listing was on 3 April 3 2018, when music streamer Spotify started trading on the NYSE without raising any funds.
Martin’s advice to someone interested in a career involving data services, listed stocks trading or at an exchange is to expect the unexpected.
“Traditional degrees are not necessarily going to be what are going to make you successful, so be intellectually curious about the technology that underpins the systems,” she said. “Never be afraid to speak up if you want an opportunity, or take on an additional project that interests you”
When asked what she wished she knew 20 years ago, Martin said she wished she knew how important the role of the programmer was going to become in financial markets.
“I didn’t fully appreciate that the person writing the code was going to be the one interacting with the systems and the importance of efficient interaction,” she added.