A Blog by Jonathan Low


Dec 21, 2012

New York Stock Exchange Sold: World Shrugs

History repeats itself, the first time as tragedy, the second time as farce.

A clever 19th century intellectual property options trader who some thought revolutionary named Karl Marx coined that phrase. And he knew whereof he spoke.

Two years ago, when attempts were made to sell the NYSE for @$11 billion to a global consortium of traders, the world was shocked. People mourned the passing of a great institution and speculated about the implications for America's future and its exceptionalism.

This time? Yawn.

That first deal didnt go through for a bunch of reasons having to do with money, concern about competitiveness...and money.

This time everyone knows why it's being sold: because it can be. We're having a great big national asset sale: tangible, intangible, nailed down, floating on air; if we can attach a price to it, we'll sell it. And, even better, at a discount from the previous offer. We love discounts. They're so...cheap.

Why reform your economic system when you can sell off the pieces for cash money. The brand, some are quick to note, will remain. In Atlanta, the center of...north central Georgia. But hey, the NYSE brand is an asset with value, just like Hostess Twinkies. New owner, lower cost basis. And a bunch of lawyers and accountants are going to be kept employed massaging the tax consequences. That's about as exceptional as we get these days.

The NYSE undermined the value of its brand through previous sales, not of assets but of trust: the unwillingness to discipline its members, listing of spurious Chinese corporations, support for high frequency trading that disadvantaged average investors.

The sale of the NYSE is a symbol. Changing times, changing values. It's just that the implications for time and value are somewhat less crystalline than many would like to believe. JL

Adam Shell reports in USA Today:
The parent company of the two-century-old New York Stock Exchange, best known for its stock trading business and iconic trading floor, has been acquired for $8.2 billion by InterContintenalExchange, a 12-year-old upstart that specializes in commodities, futures and derivatives trading.

The deal marks the latest chapter in the quickly changing and increasingly global exchange business The business of buying and selling securities has been revolutionized in the past decade by tech innovations that have reduced the need for human traders, sped up trade executions to milliseconds and paved the way for the creation of ever-sophisticated trading strategies.

While ICE is a rising star in the exchange world, it said it will operate dual headquarters in Atlanta and New York, and stressed that it has no current plans to shut down the NYSE's famous trading floor, a move cheered by U.S. Sen. Charles Schumer (D-NY). "They have assured me they will keep the floor open," said Schumer. "I am pleased they will keep the New York Stock Exchange name and protect the brand."

ICE is acquiring the NYSE's parent NYSE Euronext for $33.12 a share, 38% above Wednesday's close. Shares closed Thursday at $32.25. ICE shares rose $1.79 to $130.10.

The deal marries NYSE Euronext's global stock and derivatives franchises with ICE's global clearing house business and its commodity and derivatives exchanges. ICE's futures trading business includes commodities ranging from coffee to coal and crude oil to currencies. The merger will result in an estimated earnings bump of 15% in year one. The deal is expected to close next year pending regulatory approval. ICE estimates $450 million in cost savings in year two, as redundancies are eliminated, which is key given reduced trading volumes and higher regulatory costs.


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