Thursday, December 28, 2006

What a Year!

2006 was certainly eventful for NYX shareholders. Since it's the last trading week for 2006, lets take a quick look back (please browse the archives here at NYSE ArcaNews to get a sense of what was going on YoY in ExchangeLand).

Last December, the NYSE seatholders voted and approved the most monumental deal in the history of the world's capital market structure. Though perennial synics like Lucchetti, Reppetto, and Herr (to name a few) constantly made public their doubts that the deal would close, and if it did close that it would ever be beneficial to shareholders (read: Reppetto, Herr, etc's customers).

That was then. The deal closed, the newest oldest company around IPO'd in March, and NYX has never looked back.

While NDAQ butchered its credit quality while trying to inch its way to the spotlight, NYX quietly pursued creating the first Trans-Atlantic exchange. The NYX team and Euronext worked diligently towards a fair deal, and just a few months after the NYX became a for-profit enterprise, the deal was done -- NYSE Euronext has been born.

This means that in addition to the hundreds of millions of dollars that NYX will save in cutting redundant costs, the company has a best-in-class platform for options, futures, bonds, and stocks.

To be sure, futures have gotten much attention as their margins are wide enough to drive a train through (read: they're incredibly big). NYSE Euronext's Liffe (click here for more info on Liffe) brings NYX into this lucrative marketspace.

Though not the most happy headlines, the cost cutting at the Big Board has been quite impressive. Many were aware of the fat that the NYSE schlepped around for centuries, but to actually see the savings that result from rightsizing the organization is not only good for NYX's bottom line, but it's a reflection of a culture that's completely changed, and a focus on driving shareholder return while keeping the NYSE the most advanced and largest bourse on the planet. For example, ~20% of the trading floor is being shut down, and scores of the old brass were made redundant.


Of course, the year was spotted with nonsense from the media and sell-side community. The Wall Street Journal's, Aaron Lucchetti could probably get a gig working for sales organizations to lead brainstorming excercises about potential objections (if you prepare for potential objections, you can be ready to overcome them). For years he's been writing about every possible unfavorable outcome for any strategic initiative that the NYSE undertakes. His expensive prose about NYX have consistantly mislead for years (he constantly got the AX story wrong too).

Not to be outdone by the WSJ, the majority of sell-side shops (that cover NYX) have consistantly demonstrated to their customers that they oughta ignore their thoughts. There are some specific analysts that are candidates for Clown-with-a-Calculator-of-the-Year. First, the candidates:

* Richard Reppetto, Sandler O'Neil
* Richard Herr, Keefe Bruyette
* Michael Vinciquerra, Raymond James

Click here for a summary of how clear the aformentioned clowns vision is. You can gain a sense of their accuracy, but more importantly, you can gain a sense of how incredibly distorted their mosaics are that they use to determine NPV of NYX stock based on projected cash flows.

And, the winner is:

Sandler O'Neil's Richard Repetto!! And here's why.

Repetto's been wrong about NYX since it was in gestation (AX). Simply put, he's constantly been wrong about NYX. The reason that he beats the other clowns out for this title goes back to his appearance on CNBC in March, the day of the NYX IPO.

While many were celebrating the birth of NYX, Repetto spoke on CNBC about his idea the potential of the NYX has already been priced into the stock (when the stock IPO'd it was trading in the 60 - 70 range, and it even tradfed up to 88). Recall, at that time, there was no real discussion about NYSE Euronext. Maybe just some speculation that an exchange could do a cross-border deal. Nonetheless, Reppetto was bearish.

It's truly worth listening to a quarlerly earnings call so you can hear, first-hand, how the analysts typically are not viewing NYX's glass as half-full. It's not unusual to hear NYX's management correct an analyst as they ask their questions during the Q&A of the call. I still think my favorite question he's asked was to AX's management years ago. His question to AX management centered around why AX's daily trading volume was so light. Boy, that's a great question for management during its quarter-end call. At least it was indicative of what sort of metrics Reppetto spent time analyzing.

Now the NYX will operate its cash markets in 2 of the 3 largest currencies. It's refreshing to hear a focused management team that knows how to execute. NYX told the street that they were interested in expanding into Europe -- and it happened. Now they've said they're interested in expanding into Asia. Quietly, they'll execute. In the meantime, the aformentioned clowns with calculators and typewriters, may continue to create drama by taking the other side (read: pointing out potential pitfalls) as they position for next year's NYSE ArcaNews annual clown award.

In case expanding into Asia (or other countries/currencies) is not big enough news. Other initiatives include Hybrid, creating structured products, and adding listings to NYSE Arca (hopefully at the expense of NDAQ -- see RHT).

So, once again, Happy New Year to my NYSE ArcaNews readers. I hope you've enjoyed my blog, and I look forward to another year of bringing you my thoughts on what I truly believe is the most advanced, innovative, best managed, strongest brand, bourse in the world.

What a year!

Monday, December 18, 2006

Time to Vote

No doubt, with the upcoming votes, history is on the cusp of being made. NYSE Euronext will create a bridge between the capital markets of Europe and the US never before seen. The cost savings, revenue-stream diversification, technological leverage, etc. that NYX Euronext weaves is unprecedented. If you'd like to hear a webcast of the Euronext General Meeting tomorrow (at 5 AM EST) click here.

Also, for some background on Euronext click here.

Tuesday, December 12, 2006

Nasdaq loses Red Hat to NYSE

Here's an interview from Dow Jones (Marketplace) with RHT Chairman and CEO, Matthew Szulik, from this morning as he comments on his firm's great choice to get Listed. Since this video may eventually get removed from the website (and this link will be no good), here's a quote of what Mr. Szulik says towards the very end of this vignette:

Marketwatch's Steve Gelsi:
"...Now that you're [Listed] on the NYSE, are you looking for less volatility?"

Szulik: "Certainly, that was part of our thinking, Steve. We thought that the use of specialists and the technical direction that the NYSE is heading in will give our shareholders, hopefully, less and less volatility in their trading ranges."

It's great to see a revolutionary company like Red Hat align itself with a revolutionary, global powerhouse like the NYX. If shares could speak, RHT would be singing Kumbaya.


In yet another example of NYX's dominant market position, Red Hat (formerly, RHAT), has decided to move to the world's most advanced stock market -- the NYSE. Beginning today, they'll trade under the ticker, "RHT."

As part of the Nasdaq 100 (QQQQ), RHAT was a core listing for Nasdaq. To be sure, Nasdaq was once considered the destination for firms that valued technology and progressive thinking. However, the NYSE/AX integration has created the most innovative and advanced stock market in the world.

This is a big win for NYX and is a reflection how the landscape has changed.

Under the new landscape, a company like RHT, which was formed in 1993, could initially list on NYSE Arca if they didn't meet the listing requirements of the Big Board. On NYSE Arca they'd enjoy openness, fairness, and strict price-time priority (Click here for more advantages to a NYSE Arca listing).

NYSE Arca serves as a wonderful destination for firms to list and work towards achieving a Big Board listing as the company grows. As NYSE Arca/NYSE gain traction in attracting traditionally Nasdaq style listings (like RHT), NDAQ will likely turn into a dollar-store-like market for financially inferior firms to trade their shares.

So now American Eagle Outfitters replaces RHT in the Nasdaq 100. That just seems odd. Suppose if AEOS could talk, a share would be singing the Monkees, "What am I Doing Hanging Around?"

Tuesday, December 05, 2006

Too hard to ignore!

UPDATE: After the original post today, NYSE ArcaNews learned about the SEC's approval of completing Hybrid's exciting, Phase III, rollout in January. Read all about this incredibly monumental news right here. To get a sense of the scale that Hybrid has already achieved, checkout this listing (Adobe Acrobat needed to read) of activated issuers. To be sure, numbers this big are hard to ignore!

Now that the European regulators have given the green light for NYX and Euronext to join forces, it's interesting to look at the competitive landscape as it collectively watches NYX Euronext dominate the global stock marketplace.

To be sure, NDAQ's mission to have a meaningful presence outside of the US continues to make for interesting fiction, but with inferior credit quality and an unwilling seller seems quite unlikely to materialize. And, occasional ideas that bulge-bracket firms can discover a core-competency in running bourses make for fodder in bidness rags.

But, today's remarks from Deutsche Boerse AG supervisory board head Kurt Viermetz illuminate some of the opportunity that lays ahead for NYX Euronext. He says, "Now for the first time, it seems realistic that Europe will continue to grow even if the U.S. is experiencing a marked slowdown." (Source: Article by Ragnhild Kjetland; Dow Jones Newswires; 12/5/06).

Clearly, part of the opportunity that the Euronext merger fosters is that NYX and Euronext, in many ways, can hedge each other's risk related to issues particular to a nation's currency, economics, politics, etc. So, in addition to diversifying revenue streams and cutting costs significantly, a trans-Atlantic business reduces risk for both NYX and Euronext.


On another note, it appears as though short interest in NYX has actually increased from 10/10/06 to 11/10/06. This information is available through Finance Yahoo (click here to see). Of course, the market's the market, but if you haven't noticed, the NYX stock has been acting a bit squirrly lately. Remember, as a stock goes higher, those that are short shares lose.

The loss continues to deepen until the short-seller (one who borrows shares to sell; artifical sellers in a sense) covers their short by buying back the shares they borrowed. They lose if the stock goes up since they have to buy it for more than they sold it for. Theoretically, a short seller has an unlimited loss potential. Anyhoo, those that are short a stock end up buying it back at some point. Often, a high short-interest can serve as a bullish indication since it indicates built-in demand.

Granted, the short data mentioned above is nearly a month old, and I don't have any more recent data. However, odds are, folks who shorted NYX could use some Rolaids about now (or some clown to downgrade the stock).
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