Tuesday, January 30, 2007

Go East, Young Man! (or west depending on perspective)

First, the picture on top is the Tokyo Stock Exchange (TSE) now. The one below that is what the TSE looked like in 1990 - prior to margin expanding technological innovations that have transformed it into an incredibly efficient (and about to grow more stable) platform for issuers, traders, and investors. If you watch CNBC or Bloomberg, you can see firsthand how the complexion of the the NYSE floor is evolving in a similiar fashion (thanks in large part to a brilliant deal with ArcaEx).

This afternoon Taizo Nishimuro, the Tokyo Stock exchange's CEO and John Thain addressed the Japan Society in New York. During this talk, Mr. Nishimuro, said that an agreement may be announced Wednesday, and that the TSE and NYSE Euronext may cooperate on areas such as new products, listings and systems (this info comes from a Dow Jones Newswire release written by Gaston Green that came out this afternoon).

If and when a deal is announced, it will be yet another demonstration of brilliant jockeys aboard a world-class champion thoroughbred! Designing a business plan that's strategic, innovative, and smart is one thing. Executing is another thing, entirely. Just look the pervasive pie on NDAQ's face that's accumulated over the years. Just a quick review:
  • In 2002, Nasdaq wrote off a $20mm venture with the TSE that it entered into during 2000. Click here to learn more about that failed initiative.
  • In 2003, Nasdaq shutdown its ill-conceived Nasdaq Europe (click here for more on that).
  • Also in 2003, Nasdaq failed with their attempt to execute a plan with Commerzbank and Dresdner and the Berliner Bourse something like five months after the deal was done. (Click here for more on this)
The latest LSE dibacle illustrates what a difference in quality underlays the NYSE and NDAQ. But that's another post for another day. Back to the TSE. . .

Here is a peak at part of what makes the TSE so exciting. First, note the significant rise in net income and revenue noted in this release. Both are displayed at the top of the linked PDF.

Here's a link to a portal for plenty more background on what looks like the newest addition to a truly global marketplace.

Thursday, January 25, 2007

Sweeping Changes at the NYSE

Today's NYSE ArcaNews entry is short and sweet. The often cited WSJ reporter, Aaron Lucchetti, scribed a very interesting article in today's Journal. To be sure, NYSE ArcaNews has covered Mr. Lucchetti's coverage through the years, and today's article finally reveals some factual information that's worth digesting. For obvious copyright reasons, the article won't be posted here, but the headline reads, "NYSE: Faster (and lonelier)." Here is a round-up of some interesting facts contained in this article:

This snippet illuminates what's so monumental about the NYSE/AX Merger and the efficiencies that AX brings to the NYSE:
* ". . .for the employees who work on the NYSE's iconic trading floor it means fewer jobs and the biggest change to the way the Big Board has traded stocks in its 214-year history."

This blurb helps to explain why in the world NYX was booed on the Floor on the day of its IPO:

* ". . .It's been a very painful" few months, says Michael Rutigliano, a longtime NYSE floor broker. "I understand why it's happening, but it's not pleasant when people you have admiration for are losing their jobs." Last week, traders gave departing colleagues standing ovations on about a dozen occasions when the laid-off employees left the floor for the last time."

This part of the article illuminates how innovative and solid technology can enhance business processes:

* ". . .
Now, specialists, instead of overseeing trades in a handful of stocks, supervise computer programs that spit out thousands of trades a minute. One sign of the change: Specialist clerks that collectively banged their keyboards 45 million times a day have cut that to fewer than 20 million keystrokes."

And this video is outstanding! It's a 4-minute interview by Lucchetti with Richard Barry, a LaBranche & Co. specialist. One takeaway from this conversation is Barry's statement that one of the biggest changes with Hybrid is that before turnaround time for an average order was between 8-9 seconds. He goes on to say that now the turnaround time is now 200 miliseconds.

It's refreshing to see factual information being published. These changes are indeed monumental and revolutionary. This is perhaps the most exciting time in the evolution of the global bourse world -- and NYX is certainly the lead engine.

Tuesday, January 23, 2007

Hybrid's In Place!

Since 4/20/2005 (NYSE and Archipelago's merger announcement), there have been monumental structural changes to the way trades get done at the NYSE. Regulation NMS helped usher in regulatory changes that helped generate competition, efficiency, transparency, and overall fairness in the equity market structure.

The efficiencies include the replacement of some of the quickest digits known to mankind (read: the fingers that onced tapped feverishly on floor of the NYSE) by computer systems that underscore the greatest transformation seen on Wall Street in decades, if not centuries. Greater efficiencies improve margins, and also improve the quality of trading.

Van Der Moolen announced today that 30% of their US-based employees will be getting the ax (pun intended). This comes on the heels of LaBranche's cuts and other firms that once dominated to NYSE infrastructure. Macchiveli writes that change leads to other change, and the transformation occuring on the corner of Wall and Broad reflects this Macchivelian idea. Just think about how much has changed in this space since Archipelago debuted as a public company in 2004. And, it's exciting to think about changes that will occur in this space over the next couple of years.

It's worth noting that NDAQ seems to come out with nonsense that grabs media attention during times that notable advances in the execution of the NYX business plan by a host of briliant managers occur. Today, NDAQ's spotlight quest comes as a letter to LSE shareholders that the company they mutually own has unrealistic growth targets. While NDAQ is busy sending unsolicited takeover faxes to LSE's management, and drafing letters to shareholders that aren't their own, NYX continues to execute it's well-conceived plan to dominate the global marketplace for nearly all investment products. The correlation between NYX's successes and NDAQ's blunders are worth noting.

As March approaches we should start to hear about perceived issues related to lockups of NYX stock. It'd be great to hear what Langone and Higgens have to say about the value generated in their shares since last March.

The move to Hybrid is a major accomplishment. Congratulations to all that have been working on going totally live with it this month.

Here are two links to much more about what makes Hybrid so exciting:
1) NYX Website's Info
2) NYX Hybrid Blog

Hope these links help.

Friday, January 05, 2007

CNBC's Cramer's -- On The Money!

In case you haven't yet heard. Jim Cramer, has come out with his stock picks for 2007. He revealed that his #1 pick in the Growth Stock category for 2007 is. . .NYX!

Here's what he said according to's "Mad Money Recap":

"And the Winner Is...NYSE Group. Cramer's growth stock for the new year is the NYSE Group. If you're comfortable taking a few risks to make more and more mad money, NYX is for you," he said.

Cramer believes the NYSE will grow, blow away its estimates and "keep flying" because its main objective is to make money. The company is shutting down trading rooms and laying off people, replacing them with faster and cheaper machines.

Cramer said the stock has great revenue growth and a sound cost-cutting strategy, which should save the company millions of dollars. In addition, it has the lowest operating margins of all publicly traded exchanges and "low, beatable estimates," Cramer said.

The only reason NYSE shares are down is because of arbitrage pressure from its pending Euronext acquisition, said Cramer, and that pressure shouldn't last. The NYSE is ready "to conquer the world" and should go to $240 a share, Cramer said."

Thursday, January 04, 2007

2007: A Year of Transformation

Today, Morningstar handed out its annual "CEO of the Year" award. The news here isn't so much who won, but the managers that were in the running. NYX's CEO, John Thain has demonstrated his brilliance as he inked a revolutionary deal with Archipelago Holdings that essentially rescued the storied institution from obscelence. Then he helped navigate the Atlantic to create a cross continental fusion that will serve as a pool of liquidity never before seen. The deal with Euronext is just the latest example of what happens when incredibly smart people work hard together to extract value from what well may be the most well known brand on Wall Street (and for that matter, on Earth).

Here's a blurb from the Morningstar news release mentioning Mr. Thain:

"In addition to Oberton, the finalists for Morningstar's 2006 CEO of th Year award included: John Chambers, chairman and CEO of Cisco Systems (Nasdaq: CSCO); Ken Chenault, chairman and CEO of American Express (NYSE: AXP); George Roche, chairman and president of T. Rowe Price Group (Nasdaq: TROW); and John Thain, CEO of NYSE Group (NYSE: NYX)."


CNBC's Mark Haines was mystified yesterday morning. He walked around the floor, on camera, pointing out booths that were staffed a week ago with people, and have now been replaced by computers. Haines remarked that things don't look good for traders. NYX shareholders might observe that things certainly look good for cost cutting initiatives.

If you haven't seen it yet, checkout this awesome NYX Hybrid blog for up to date information regarding this incredibly exciting, unique, and efficient system.


Yesterday, the SEC responded to Netcoalition's whining that NYX should be able to set prices for data feeds to websites such as Yahoo and Google. The argument is pathetic, at best, and helps illuminate the value of what happens at the New York Stock Exchange. To be sure, websites like Yahoo get eyeballs by "re-selling" data (read: raw materials) to consumers. The websites make money by generating these eyeballs (by attracting advertisers). However, for Yahoo's Finance section, the market data that's furnished by NYX is the lure for many consumers. If these websites can profit due to NYX's data, why shouldn't NYX be able to profit for supplying this data to the websites?

The SEC already approved the fee increases, but Netcoalition is flexing its political muscle to try to influence the SEC to interfere with the free market. Though data fees are ~10% of the overall revenue picture for NYX, it's an stream that could grow nicely. Buffet might call this part of the joy of being a (responsible) tollkeeper.

Things get interesting when you consider that Euronext operates under European regulations. Netcoalition's influence in Europe may not be quite what it is in the US. Just another example of the wisdom of management to diversify geographic and regulatory risk.

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