NYSE to Put Cameras on Trading Floor

NEW YORK—The clandestine world of Wall Street will be a bit more transparent during the second quarter when the New York Stock Exchange (NYSE) installs cameras on its trading floor in an effort to avoid regulatory snafus, NYSE officials say.

The initiative will begin with a pilot phase that will place the cameras at 20 spots throughout the floor for approximately 18 months. "It's another tool to find out what's happening in the trading crowd," says Brendan Intindola, an exchange spokesperson.

The move comes after the U.S. Securities and Exchange Commission (SEC) and the NYSE last year took disciplinary actions against seven member firms and 15 individuals for violating exchange rules and SEC regulations. Those firms include Morgan Stanley, which paid $13 million in fines for, among other things, the inadequate monitoring of correspondence like e-mails and faxes and failing to process fingerprints and maintain background check databases on new hires, according to the NYSE. The firestorm over these violations prompted the exchange to consider the camera project in order to keep a closer eye on trading floor participants.

It is unclear at this point whether specific exchange personnel will be trained to monitor these cameras for infractions, Intindola says, or whether existing staff will peruse the footage. It is unlikely that monitoring will be a constant operation and will instead be used after the fact.

"There might be some random monitoring of the sound and images captured but it's likely to be used once the problem has been identified," Intindola says. In the equities market in particular, where "there are not lots of hand signals" the exchange would be "looking at images on the screens or keystrokes."

Providing a secure system is a top priority given that "you see stories every day about some sort of electronic security breach," Intindola says. "There are always concerns about e-security, from a performance point of view, but also from assaults from the outside." The exchange has not yet encountered any backlash from privacy advocates, he says.

At this point, it's "too early to tell" if the project will move beyond the planned 20 monitoring stations, but that will be under review after the pilot, Intindola says. "We would review it in terms of its effectiveness and make a determination from there," he adds.

The exchange declined to provide further details on exactly what technology will be in use or what vendor will provide the equipment. "We don't generally comment on what vendors we use," Intindola says.