NYSE Fades as Symbol Since 9/11

NEW YORK (TheStreet) -- It was an interview with Dick Grasso, the former chairman and chief executive officer of the New York Stock Exchange, on CNBC that brought into focus the extent to which the advances in globalization and technology have eroded the iconic status of the NYSE (NYX) since the terrorist attacks of 9/11.

On Monday morning, the financial media were spending ample time ahead of the opening bell debriefing in the wake of Hurricane Irene. A natural question for Grasso was how trading could have continued had Irene managed to slam into New York City at full force. The answer? Thanks to advances in technology and moving key systems and backup systems outside the city, the NYSE could have quickly and easily gone fully electronic.

"Lower Manhattan as a processing site is no longer key for the operations of the exchange," said Grasso.

That was both reassuring and somewhat disconcerting for those watching and the panel of "Squawk Box" anchors.

Grasso was immediately asked if the NYSE's future was one in which the exchange didn't need to have an open in the U.S.

"Well, you're right," said Grasso. "Between the upcoming merger with Deutsche Borse, they have the ability to put their market to any of those alternative sites. What, of course, we have come to take for granted, unfortunately, is the strength and depth of the New York Stock Exchange."

Grasso went on to say that the NYSE's current management understood the significance of physically opening the market, even if a majority of trading occurred electronically. Still, the CNBC anchors' minds had gone down the rabbit hole along with viewers, reaching an unpleasant conclusion.

"Do you think there's ever a time in the future where we actually, where the NYSE sells that piece of property, that beautiful building downtown," Michelle Caruso-Cabrera asked Grasso.

"I hope not, Michelle, because I think that represents the real icon of American capitalism -- what makes us different as a capital market to the rest of the world," said Grasso. "I know how much the current management, you know, appreciates that and are going to enhance it with their upcoming Deutsche Borse combination."

The NYSE still sees a crucial role for a physical open. "A physically convened market such as the NYSE plays a critically important and vital role in our capital markets, especially during times of volatility such as this past August," said a NYSE spokesperson. "With respect to our contingency plans for Hurricane Irene, if necessary the NYSE market would have remained open with trades processed through NYSE Arca, our fully electronic exchange, which would have been officially designated NYSE while operating under NYSE Arca rules."

The NYSE hasn't been alone in losing clout on the global financial scene over the last 10 years. Its loss of influence was inevitable given the forces of globalization it helped spur. The impact has been felt throughout Wall Street.

Employment on Wall Street has swung up and down with the markets, but has largely been on the decline.

"Wall Street has never regained its peak employment level, 195,400, set during the 'tech bubble' in 2000," said a June 2009 report produced by the New York Department of Labor. Securities employment in the city managed to rise to 186,100 in 2007, making up 6% of the city's private-sector employment, from 161,300 in 2003. However, employment has returned to 2007 levels. In July, the New York Labor Department said the number of Wall Street jobs had fallen to an eight-month low of 168,300.

Nationally, according to Reuters, the financial industry employs 7.6 million people, down 9% from a 2006 peak of 8.35 million and at lows last seen in January 1999.

For now, it doesn't appear the NYSE will be going anywhere. Its $9.4 billion merger with Deutsche Borse was given the OK by the Committee on Foreign Investment this month, bringing it one step closer to becoming the world's largest exchanges company. Before we celebrate, consider that Deutsche Borse will get a near 60% stake in the merged entity and 10 out of the 17 board positions.
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Following the 9/11 attacks, the area surrounding the NYSE was, quite understandably, transformed from the happy hub of capitalism to a high-value target where capitalism took place behind barricades and men with machine guns. It has become Fort NYSE, a base not even the public gets a chance to see anymore. The irony, of course, is that there's been less and less to see.

As CNBC's anchors sheepishly acknowledged on Monday, the NYSE, its iconic building, and to a greater extent Wall Street, are becoming wholly symbolic.

Should we bemoan this fact? Few on Wall Street are likely to, as this transformation is simply the next evolution in a now truly global market, one that may have taken root here but has outgrown its physical boundaries.

And what's to become of the iconic NYSE building? One need look no further than across the street to Federal Hall. The location was once New York's city hall, was the site of George Washington's inauguration and eventually housed our country's first Congress and Supreme Court. Federal Hall's varied reasons for existence have long since passed, but its legacy remains intact.

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-- Written by Ross Tucker in New York.

>To contact the writer of this article, click here: Ross Tucker.

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