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Handa/Tiwari Floor Trader Study Noted

In the "Trading Shots" column, it's noted that the New York Stock Exchange is doing away with its seats, and eventually will probably do away with its bodies, too. The NYSE swears there will be a place for floor traders, but Wall Street thinks the end is inevitable. At first glance, there are some benefits to losing floor traders. Though some "specialists" would probably be kept around to ride herd on trading, the bad apples among them might get fewer chances to dip into clients' wallets. Trading would be less costly and certainly will be quicker, for what that's worth. Eliminating floor traders, if not done right, could cause problems for investors. Last year, a study by finance professors PUNEET HANDA and ASHISH TIWARI of the University of Iowa and Robert Schwartz at Baruch College, City University of New York, found that floor trading at the American Stock Exchange was more efficient than the Amex's automated system. "Floor traders were waiting for the opportune time to execute trades to minimize the price impact," says Mr. Tiwari. "For certain kinds of investors -- institutional traders -- that could be valuable."

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