Monday, April 24, 2006

Lucchetti and WSJ's "Sick Sigma"

While the media has wasted all sorts of ink (and reader's time) speculating about a NYX/LSE tie-up, today's announcement from London should quell some of this speculative, anonymous source, jibber-jabber.

On 4/20/06, the same day that NYX reported impressive numbers, WSJ's Aaron Lucchetti continued to showcase his propensity to speculate as well as his seeming reluctance to report factual information.


Today, The London Stock Exchange said it had not been approached by NYX about a possible offer. This report contradicts recent speculation by the WSJ that NYX was in talks with LSE about striking a deal.

In fact, LSE said it was responding to press speculation and said "it has not received an approach from the New York Stock Exchange about a possible offer" (source: WSJ, 4/24/06).

In a WSJ piece from 4/20/06, Lucchetti co-wrote (with Karen Richardson):

"They [NYX shareholders] know they'll get at least a stake in the biggest stock exchange in the world, a small business in stock options and a budding effort in bond trading. But they may also be getting a piece of a business that could look substantially different in the months and years ahead: The NYSE has talked to London Stock Exchange PLC and European exchange operator Euronext NV in recent weeks about possible deals or alliances. And Mr. Thain has also made clear that he's interested in buying a U.S. derivatives (or futures or options) operation."

To be sure, NYX is smart and methodical. In due course, facts will prevail. If you're new to NYX please refer to some of the archives on this blog to see for yourself just how often the same reporters and analysts are wrong about their speculation about NYX.

At what point do reporters and analysts that are consistantly wrong stop getting handed the megaphone?


Reg FD requires that material information about a public company be communicated to all investors at the same time. Certainly, speculation can create drama. And, drama certainly helps sell papers. Thing is, the reputation of a paper relies on the quality of its reporting. Not naming sources, reporting information that is simply not true, and consistantly being wrong with your commentary has an impact on the quality variable.


It's odd that in today's WSJ piece about the LSE announcement that they'd allude to an article that Lucchetti wrote on 4/16/06 that cited a couple of lines from a recent NYX filing regarding the upcoming secondary as the catalyst for speculating that NYX and LSE were in talks. It's odd because on 4/20/06 Lucchetti reported that "the NYSE has talked to the London Stock Exchange PLC." This assertion by Lucchetti, as we've now learned, was purely speculation and not rooted in fact. Here's what WSJ writer David Weidner wrote as he tries to do some damage control:

"The Wall Street Journal reported April 16 that NYSE is in talks, presumably with the LSE The Journal cited a Securities and Exchange Commission filing by the NYSE that read: "We are currently engaged in discussions with certain participants, although no definitive terms have been discussed or agreements reached." The report also cited anonymous sources saying the exchanges were conducting informal talks."

If Lucchetti's quality controls are any indication, one might classify WSJ's style of QA, or lack thereof, as "Sick Sigma."

Thursday, April 13, 2006

Nasdaq's Credit Slides Again

To be sure, Nasdaq made a splash when word came out that they purchased a chunk of LSE. However, NDAQ's purchase cost it significantly more than just the cash they used to buy their LSE shares. It cost them a further slide in their credit rating. In fact, as you'll read below, Nasdaq is now flirting with junk status.

Among other negatives, companies with poor credit quality end up needing to pay higher rates on their debt. Their debt becomes more difficult to fund. This results in inability to grow and compete.

Here is a clip from a story released this morning by Dow Jones Newswire's Gaston Ceron:

"Nasdaq is facing scrutiny from credit-rating agencies over the debt it's shouldering to finance the LSE share purchase, which follows the heavier debt load Nasdaq took on just last year for its December acquisition of the Inet stock-trading system. Wednesday, Moody's Investors Service cut its ratings on Nasdaq to Ba3 from Ba2, also lowering its rating outlook to negative from stable. Although there are benefits to a deal with the LSE, Moody's noted that the share purchase "will initially result in a material increase in leverage and erosion of debt service coverage."

The action by Moody's came a day after Standard & Poor's placed its BBB- counterparty credit rating on Nasdaq on CreditWatch with negative implications, signaling that Nasdaq's rating could be cut to junk status by S&P. Like Moody's, S&P also cited the LSE stake buy."

Wednesday, April 05, 2006

Hybrid's Impressive Evolution

As of 4/4/2006 there are 1659 Listed stocks active in Phase I of the Hybrid Market. According to the NYSE Hybrid Markets blog (click here for that), that number is four times the number of stocks that were active in Phase I as of 4/3/2006. In other words, 401 stocks were in Phase I on 4/3/2006 and as of 4/4/2006 there are now 1659 stocks active in Phase I.

If you're wondering, there are ~278o companies listed on the NYSE as of this post. This means that we've cleared the halfway point as far as activity in Phase I of Hybrid for Listed companies.


If you're curious about Hybrid here are some resources to help:
  • Click here to view a list of these 1659 companies.
  • Click here for an 83-page illustrated conceptual guide to Hybrid with plentyof examples
  • Click here for the Traders Magazine's webcast (from 2/22/2006) devoted to Hybrid
  • Click here for a bird's eye view some Hybrid concepts
Hybrid Market is yet another example of how innovation continues to differentiate NYSE Arca from the rest of the competitive landscape. The speed at which NYX is moving to get Hybrid in place and the well-thought-out phased approach to their implementation is a reflection of what a truly amazing company NYX is.

Tuesday, April 04, 2006

NYSE Listing

This morning's opening bell was sounded by Ireland-based, CRH plc. This is truly a nice listing for the Big Board. Much was made of Schwab's departure from NYX, however, CRH is a company that boasts roughly $16.7 billion in revenue, top-line growth of ~$3bb/year for the last 3 years, book value of ~$8bb, and free cash flow of $1 billion (Click here for source).

Compare that to Schwab's numbers. $5.1bb, top-line growth of ~$600mm/year for the last 3 years, book value of ~$3.5bb, and free cash flow of $550mm (Click here for source).

This is another win for NYX and is clearly indicative of NYX's leadership position.
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