After graduating from La Salle, Kevin Kennedy did what ambitious Philadelphians had done for 200 years: He got a job with a firm that bought and sold securities the old-fashioned way — trading face-to-face, with quick-fire "open outcry" price negotiations, on the floor of the Philadelphia Stock Exchange.
Kennedy soon questioned his choice. It was 1987. Colleagues warned him electronic trading could replace the market. Bigger exchanges in New York and Chicago weighed plans to buy the PHLX, strip its customers, shut it down. "I was like, 'Oh, great, maybe I should have taken that job at Vanguard,' " the cost-conscious mutual fund company in Malvern.
But location, tech, and Philly hustle kept the PHLX going. Last Thursday, Kennedy stood before a mural of PHLX's historic homes — the London Coffee House (and previous slave market), the Old Customs House, and the underground Market Street trading floor — to mark the opening of the new Nasdaq PHLX Trading Floor and the tech offices that the giant Nasdaq group, which bought the PLHX 10 years ago, has moved from New York and Center City to three floors of the new FMC tower overlooking the Schuylkill. Kennedy is Nasdaq's senior vice president and head of equity options.
Nasdaq has 150 employees here, and plans to double that to 300 by 2019, said Tom Wittman, a PHLX veteran-turned-Nasdaq executive vice president and global head of equities.
The floor is also a workplace for more than 80 employees of Susquehanna Investments and other local, Chicago, and Wall Street firms that still see Philadelphia as an attractive place to trade. Many more trades move electronically through PHLX and other Nasdaq market systems based here.
While other local markets vanished, Nasdaq not only kept Philadelphia, but has lately added functions here, because PHLX kept investing in its software, technology, and compliance staff, at a time when other small markets outsourced.
But it still came close to going away. The market survived the 1990s because a local arm of the New York brokerage Spear, Leeds & Kellogg (now part of Goldman Sachs) built a busy crowd of Philadelphia traders specializing in Dell Computer options. But in 1998, the larger Chicago and New York markets "announced they would list Dell and put Philly out of business," Kennedy recalled.
PHLX leaders met with the New Yorkers. But Spear Leeds' Steve Levick, speaking for himself and partner Stuart Sternberg, announced, "We're staying in Philadelphia, where we made our business," Wittman recalled, with Levick nodding at the memory. "Life is a game of inches. If that hadn't happened, we wouldn't be here," Kennedy told the opening-day crowd.
It wasn't chance, it was Philly "persistence," that saved the market, insisted U.S. Rep. Patrick Meehan (R., Delaware County). "A lot of kids who didn't have a lot growing up" applied to the PHLX "to make something of themselves," he said. "It's how you hustle."
Besides PHLX people, Nasdaq liked the city's central location, and relatively low operating costs, said Raymond Mays, Nasdaq head of facilities.
So Philadelphia is now home base, not just for the updated block-long trading floor, with its air-conditioned desks sprouting multiple terminals — but also for Nasdaq's global futures and options market group, and information tech.
Today's options-trading crowds are smaller than those of the 1980s. The cost, for the handful of young traders joining the established firms, is "about the same" on paper — or less, in post-inflation dollars — than the $3,700 a month Kennedy's firm had to raise when he started 30 years ago.
The Nasdaq options group based in Philadelphia is now an industry leader, with 42 percent of U.S. volume last year, according to Options Clearing Corp.