A couple of articles of interest came out this afternoon about our objections to practices that Larry Leibowitz mentioned in a speech last week, which I posted earlier today.
One article, from Bloomberg: "NYSE Asks SEC to Strike Down Nasdaq, Bats Plan to Hold Orders" Sorry, no link available. Excerpt:
NYSE Euronext, the world’s largest stock exchange, asked U.S. regulators to stop rivals Nasdaq OMX Group Inc. and Bats Exchange Inc. from introducing a feature to hold orders for a fraction of a second, claiming it will lead to investors getting worse prices for stocks.
The Securities and Exchange Commission should strike down Nasdaq’s May 6 plan to hold orders and prevent Bats from adopting a similar feature, NYSE Euronext said in a letter posted today on the agency’s Web site. Nasdaq and Bats want to give customers an additional opportunity to fill an order before the market ships the trade to other exchanges with the best price.
... In 2005, the SEC imposed rules that require exchanges to route orders to the market that has the best price. The agency should review whether the introduction of mechanisms that delay the routing will hurt investors, NYSE Euronext said in the letter.
“The potential widespread use of holding orders by multiple market centers would impede the free and open market system” contemplated by the 2005 rules, the NYSE said. ...
The other article: "NYSE Euronext Takes 'Dark Pool' Complaints to SEC," from Dow Jones Newswires, via WSJ.com. Excerpt:
... In a letter to SEC Secretary Elizabeth Murphy, the operator of the New York Stock Exchange alleged that new order types developed by Nasdaq OMX Group (NDAQ) and BATS Exchange could hurt the investing public, and urged tougher oversight for private pools of liquidity.
... Critics argue that, as a greater amount of stock trades are executed away from public markets, exchange-listed stock prices become a less accurate gauge of market sentiment.
In its letter, NYSE Euronext said that routing stock orders through dark pools also delays execution and makes it harder for authorities to track market activity. ...
For more perspective, I urge you to read our letter, which I think makes clear that we're not criticizing dark pools -- we own dark pools ourselves, as the latter article point out -- rather, we're criticizing certain, specific practices proposed by NASDAQ and BATS. As the letter says, they're seeking "to:modify their respective routing strategies to provide preferential treatment for their own market participants before routing orders to away markets.
"As described more fully below, NYSE Euronext believes that the time is ripe for the Securities and Exchange Commission (“Commission”) to review not just the proposed Nasdaq and BATS functionality, but similar trading functionality used by registered alternative trading systems (“ATS”) that provide non-public order information to a select class of market participants at the expense of a free and open market system. Pending such market-wide review, NYSE Euronext respectfully urges the Commission to abrogate the above-referenced Nasdaq filing and reject the BATS filings as not non-controversial."
Your comments are welcome below. And yes, I'll bother you no more today.
Sunday, May 31, 2009
'Key Issues Facing the Financial Markets: Time to Re-Engage'
"[O]ur market structure has gone astray," Larry Leibowitz last week told the Securities Industry and Financial Markets Association's annual market structure conference. "Over the past 15 years the order-handing rules, decimalization, Reg. NMS were all designed to increase transparency, level the playing field and encourage limit-order display. We now live in a completely fragmented market, with 50 or so dark pools, 10 or so exchanges, and liquidity displayed to privileged participants. Liquidity has been driven underground and there is a privileged club of people who get to see orders before the marketplace as a whole. We welcome the SEC’s comments toward looking at order-handling practices, looking at ATS practices, looking at surveillance, because the truth is, we need disclosure. We need good surveillance because when information is leaked out of the marketplace in a non-level playing field way, we need to be really careful about that."
Other points from Larry, who is NYSE Euronext's head of U.S. Markets and Global Technology:
• Moves to stabilize the economy can be nit-picked but have been "directionally right;"
• Latest initiatives from NYSE Euronext, including enhanced trading capabilities, faster platforms and new markets;
• The need for regulatory clarity, and to re-regulate in a way that is global in perspective, and not overly burdensome, punitive and ultimately self-defeating;
• Reinvention on the NYSE Trading Floor;
• Treasury's plan for greater transparency in over-the-counter derivatives is welcome; we need solutions that work for the industry as well as for the greater good;
• The new listing market of choice for tech companies;
• How the necessity of restoring confidence in the integrity and fairness of the markets sometimes means "taking medicine that we don’t like, such as the short-sale restriction;"
• The need for all market participants to step up and engage in the dialogue about structure and regulation right now, before the opportunity passes.
And more, and he presented all this in a very candid, conversational and accessible way, and took questions. (I know, I was there!) The full transcript is here. As always your comments are welcome in the box below. Have a great weekend, folks.
Other points from Larry, who is NYSE Euronext's head of U.S. Markets and Global Technology:
• Moves to stabilize the economy can be nit-picked but have been "directionally right;"
• Latest initiatives from NYSE Euronext, including enhanced trading capabilities, faster platforms and new markets;
• The need for regulatory clarity, and to re-regulate in a way that is global in perspective, and not overly burdensome, punitive and ultimately self-defeating;
• Reinvention on the NYSE Trading Floor;
• Treasury's plan for greater transparency in over-the-counter derivatives is welcome; we need solutions that work for the industry as well as for the greater good;
• The new listing market of choice for tech companies;
• How the necessity of restoring confidence in the integrity and fairness of the markets sometimes means "taking medicine that we don’t like, such as the short-sale restriction;"
• The need for all market participants to step up and engage in the dialogue about structure and regulation right now, before the opportunity passes.
And more, and he presented all this in a very candid, conversational and accessible way, and took questions. (I know, I was there!) The full transcript is here. As always your comments are welcome in the box below. Have a great weekend, folks.
Friday, May 29, 2009
Tax on International Profits Will Hurt Jobs and Competitiveness, Multinationals Tell NYSE Euronext Chief
Excerpt from an interview in the new BusinessWeek:
MARIA BARTIROMO: The proposals coming out of the Obama Administration are the talk of the business world, particularly the tax on international profits. What are you hearing about this new proposal to tax profits differently?
DUNCAN L. NIEDERAUER: I was in Texas and California in recent weeks and probably met with 100 company executives. The reactions among many could be summarized in the following two observations. No. 1: Doesn’t the Obama Administration recognize that most [big] U.S. companies are multinationals that happen to be headquartered in the U.S.? No. 2: Doesn’t the Obama Administration appreciate that a multinational headquartered in the U.S. doing business overseas does not mean the company is evading taxes? If somebody who’s operating in the U.S. has an overseas business with a mailbox in a tax haven then obviously that is bad behavior and should be dealt with. Companies that have overseas businesses in legitimate tax jurisdictions, who pay taxes in those jurisdictions on the business they do there, that is not in the same category. And what I’m hearing from executives is that this proposal suggests we’re all behaving badly, when, in fact, I would imagine very few of us are.
What’s the reaction going to be?
The initial sense we’re getting—and we plan to survey our listed companies in the coming days to get a more accurate read—is that these companies will find ways to cut expenses to compensate for this increase in taxation, and that will probably be largely in the form of jobs. And companies might continue to be headquartered in the U.S. but would perhaps incorporate in another G-20 jurisdiction.
Besides job cuts, are there other implications?
As a student of the market, you’ll appreciate this. If $210 billion is coming out of everybody’s aftertax net incomes over the next decade, put whatever multiple you want on that, and that would tell you trillions of dollars should rationally come out of equity market capitalization were this to go forward. The other implication is probably it’s got to have a negative impact on our ability to compete because it almost encourages you to be a localized company, not a multinational.
MARIA BARTIROMO: The proposals coming out of the Obama Administration are the talk of the business world, particularly the tax on international profits. What are you hearing about this new proposal to tax profits differently?
DUNCAN L. NIEDERAUER: I was in Texas and California in recent weeks and probably met with 100 company executives. The reactions among many could be summarized in the following two observations. No. 1: Doesn’t the Obama Administration recognize that most [big] U.S. companies are multinationals that happen to be headquartered in the U.S.? No. 2: Doesn’t the Obama Administration appreciate that a multinational headquartered in the U.S. doing business overseas does not mean the company is evading taxes? If somebody who’s operating in the U.S. has an overseas business with a mailbox in a tax haven then obviously that is bad behavior and should be dealt with. Companies that have overseas businesses in legitimate tax jurisdictions, who pay taxes in those jurisdictions on the business they do there, that is not in the same category. And what I’m hearing from executives is that this proposal suggests we’re all behaving badly, when, in fact, I would imagine very few of us are.
What’s the reaction going to be?
The initial sense we’re getting—and we plan to survey our listed companies in the coming days to get a more accurate read—is that these companies will find ways to cut expenses to compensate for this increase in taxation, and that will probably be largely in the form of jobs. And companies might continue to be headquartered in the U.S. but would perhaps incorporate in another G-20 jurisdiction.
Besides job cuts, are there other implications?
As a student of the market, you’ll appreciate this. If $210 billion is coming out of everybody’s aftertax net incomes over the next decade, put whatever multiple you want on that, and that would tell you trillions of dollars should rationally come out of equity market capitalization were this to go forward. The other implication is probably it’s got to have a negative impact on our ability to compete because it almost encourages you to be a localized company, not a multinational.
NYSE Euronext Co-CIO to Deliver Keynote at 2009 Red Hat Summit
From the Red Hat press release:
NYSE Euronext Co-CIO to Deliver Keynote at 2009 Red Hat Summit
Steve Rubinow to share strategy of building one of the world's most mission critical IT environments with open source
RALEIGH, NC - May 27, 2009 - Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced that Steve Rubinow, co-global chief information officer at NYSE Euronext, will keynote at the 2009 Red Hat Summit.
NYSE Euronext (NYX) operates the world's largest and most liquid exchange group. With over 8,000 listed issues globally, NYSE Euronext's equities markets represent nearly 40 percent of the world's cash equities trading volume, the most liquidity of any global exchange group. NYSE Euronext unifies six cash equities exchanges in five countries and six derivatives exchanges. It strives to provide the highest possible market quality, innovation and customer choice.
NYSE Euronext must meet and exceed daily IT demands to handle heavy workloads while producing fast-paced performance results across its global systems. With its cutting-edge IT strategy, led by Rubinow, it has brought the exchange group to the forefront of elite IT innovation with systems that push the highest speed, scalability and performance expectations.
"Due to the mission-critical nature of our infrastructure to our business and that of our customers, NYSE Euronext seeks to deliver optimal uptime and system performance," said Rubinow. "I'm looking forward to sharing our open source strategy with people at the Red Hat Summit and discussing our approach to innovation in a high pressure environment."
Rubinow has decades of experience in the information technology industry, leading technology innovation, strategy and information management for many leading organizations. As global CIO of NYSE Euronext, he is responsible for most of the company's technology endeavors. Rubinow's former roles include Chief Technology Officer of Archipelago Holdings, Senior Vice President and Chief Information/Technology Officer at NextCard, Inc., and Vice President of Corporate Management Information Systems at Fidelity Investments.
"Steve is a visionary in the IT industry and we are honored to have him share some of his knowledge in developing strategic IT environments that really help drive business efficiency," said Jim Whitehurst, president and CEO at Red Hat. "NYSE Euronext is a shining example of extraordinary innovation in challenging times. I look forward to Steve's involvement at Red Hat Summit."
Now in its fifth year, Red Hat Summit is an annual conference that brings together business decision makers, engineers, developers and community enthusiasts from around the world. Attendees will learn about the latest open source advancements from Red Hat solutions and JBoss Enterprise Middleware technologies. Co-located for the first time this year with JBoss World, the Red Hat Summit will take place in Chicago, Sept. 1-4, 2009. The co-location of Red Hat Summit and JBoss World will provide attendees with the unique ability to move between both conferences with one pass, offering the opportunity to gain increased knowledge across the entire application stack.
For more information or to register for the 2009 Red Hat Summit or JBoss World, please visit www.redhat.com/summit or www.jbossworld.com.
To learn more about the results NYSE Euronext has achieved using Red Hat products and technologies, please visit http://customers.press.redhat.com/2008/05/12/nyse/.
NYSE Euronext Co-CIO to Deliver Keynote at 2009 Red Hat Summit
Steve Rubinow to share strategy of building one of the world's most mission critical IT environments with open source
RALEIGH, NC - May 27, 2009 - Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced that Steve Rubinow, co-global chief information officer at NYSE Euronext, will keynote at the 2009 Red Hat Summit.
NYSE Euronext (NYX) operates the world's largest and most liquid exchange group. With over 8,000 listed issues globally, NYSE Euronext's equities markets represent nearly 40 percent of the world's cash equities trading volume, the most liquidity of any global exchange group. NYSE Euronext unifies six cash equities exchanges in five countries and six derivatives exchanges. It strives to provide the highest possible market quality, innovation and customer choice.
NYSE Euronext must meet and exceed daily IT demands to handle heavy workloads while producing fast-paced performance results across its global systems. With its cutting-edge IT strategy, led by Rubinow, it has brought the exchange group to the forefront of elite IT innovation with systems that push the highest speed, scalability and performance expectations.
"Due to the mission-critical nature of our infrastructure to our business and that of our customers, NYSE Euronext seeks to deliver optimal uptime and system performance," said Rubinow. "I'm looking forward to sharing our open source strategy with people at the Red Hat Summit and discussing our approach to innovation in a high pressure environment."
Rubinow has decades of experience in the information technology industry, leading technology innovation, strategy and information management for many leading organizations. As global CIO of NYSE Euronext, he is responsible for most of the company's technology endeavors. Rubinow's former roles include Chief Technology Officer of Archipelago Holdings, Senior Vice President and Chief Information/Technology Officer at NextCard, Inc., and Vice President of Corporate Management Information Systems at Fidelity Investments.
"Steve is a visionary in the IT industry and we are honored to have him share some of his knowledge in developing strategic IT environments that really help drive business efficiency," said Jim Whitehurst, president and CEO at Red Hat. "NYSE Euronext is a shining example of extraordinary innovation in challenging times. I look forward to Steve's involvement at Red Hat Summit."
Now in its fifth year, Red Hat Summit is an annual conference that brings together business decision makers, engineers, developers and community enthusiasts from around the world. Attendees will learn about the latest open source advancements from Red Hat solutions and JBoss Enterprise Middleware technologies. Co-located for the first time this year with JBoss World, the Red Hat Summit will take place in Chicago, Sept. 1-4, 2009. The co-location of Red Hat Summit and JBoss World will provide attendees with the unique ability to move between both conferences with one pass, offering the opportunity to gain increased knowledge across the entire application stack.
For more information or to register for the 2009 Red Hat Summit or JBoss World, please visit www.redhat.com/summit or www.jbossworld.com.
To learn more about the results NYSE Euronext has achieved using Red Hat products and technologies, please visit http://customers.press.redhat.com/2008/05/12/nyse/.
Wednesday, May 27, 2009
Reaching Investors with Virtua Research
The Wall Street Journal today noted the fact that “Whether due to layoffs, attrition, retirement or brokerage firms moving analysts around, Wall Street's map of corporate coverage is shrinking these days.” While the decline of analyst coverage affects companies of all sizes, it is especially hard on small and micro cap stocks. According to the same article, between September 2008 and now, over 25% of research on small cap companies was dropped. For a group that is traditionally under-covered, this kind of loss is drastic.
As our customers know, public companies will have to find unique ways of reaching investors, especially if the analyst slide continues. We see Virtua Research as one piece of that puzzle. NYSE.com now contains a financial modeling tool for select NYSE and NYSE Amex companies. The web-based, interactive financial model, created by Virtua Research, enables investors to create their own financial analysis of the company, providing unique analytical insights and capabilities to investors.
We are excited about the potential of this tool. Check out the companies currently covered. There are many more to follow!
As our customers know, public companies will have to find unique ways of reaching investors, especially if the analyst slide continues. We see Virtua Research as one piece of that puzzle. NYSE.com now contains a financial modeling tool for select NYSE and NYSE Amex companies. The web-based, interactive financial model, created by Virtua Research, enables investors to create their own financial analysis of the company, providing unique analytical insights and capabilities to investors.
We are excited about the potential of this tool. Check out the companies currently covered. There are many more to follow!
NYSE Liffe US to Offer a New Suite of Stock-Index Futures Products Based on MSCI Indices
My colleagues on the futures side of our business tell me this press release represents a significant announcement for us. We're:
• Expanding our U.S. futures business beyond gold and silver futures;
• Partnering with MSCI, a leader in the field of indices;
• Offering a suite of brand-new, stock-index products;
• Complementing the liquidity on the NYSE Arca platform in ETFs based on MSCI indices;
• Moving two of the MSCI index futures from the Chicago Mercantile Exchange in 2010; they will be dual listed until then; and
• Becoming more competitive and creating a U.S. futures exchange with a unique value proposition to firms, customers and the public.
Here's a Wall Street Journal online article about the news.
From the press release:
NYSE Liffe US, the new U.S. futures exchange of NYSE Euronext (NYX), today announced that it has signed a license agreement with MSCI Inc. (NYSE: MXB), a leading provider of investment decision support tools worldwide, to introduce a suite of domestic and international index futures products built on a range of MSCI Equity Indices. This unique and extensive portfolio of MSCI linked stock index futures will provide broad and efficient market coverage of U.S. and European equity markets, including style and sector exposures as well as coverage of flagship MSCI indices such as the MSCI Emerging Markets (EM), MSCI EAFE, and MSCI BRIC Indices.
These products represent NYSE Liffe US’ entry into a new asset class beyond the initial gold and silver contracts it opened with in September 2008. MSCI, which calculates over 120,000 equity indices daily, introduced its global equity benchmarks over 40 years ago. Today, the indices are recognized and used by leading asset managers around the world.
“This license agreement marks the beginning of a substantial commitment between two industry leaders in MSCI and NYSE Euronext to develop innovative products serving the needs of the global investment community,” said Duncan L. Niederauer, CEO, NYSE Euronext. “This exciting set of products fits strategically with NYSE Liffe US’ evolving value proposition and our commitment to building a premier US futures exchange.”
Henry Fernandez, Chairman and CEO, MSCI Inc., said, “We are very excited by this development. Over the last 40 years MSCI has built a successful franchise and an internationally recognized index brand. Our market-leading range of global investable and replicable benchmark indices is now an integral part of the investment processes of thousands of institutional investors around the world. By licensing a global exchange group like NYSE Euronext, many more investors will be able to access the MSCI Equity Indices via the futures marketplace.”
“In addition to the tremendous liquidity available on the NYSE Arca platform in ETFs based on MSCI indices, and combined with the margin efficiencies available at OCC, the MSCI family of indices are a natural and exciting core product set for NYSE Liffe US,” said Thomas F. Callahan, NYSE Euronext Executive Vice President, Head of U.S. Futures. “Adding futures products based on the MSCI EM and MSCI EAFE Indices to NYSE Liffe US is the first of many innovative futures products that we plan to introduce in the months ahead. NYSE Liffe US delivers credibility and innovation along with the liquidity, functionality and cost effectiveness that our clients demand.”
“We are delighted to have licensed NYSE Liffe US for the creation of futures contracts based on the MSCI Equity Indices,” said David Brierwood, Chief Operating Officer, MSCI Inc., “The availability of derivatives based on MSCI indices provides investors around the world with flexible tools to more effectively manage their equity portfolios.”
NYSE Liffe US launched trading in September 2008 as a fully electronic, liquid market for 100 oz. gold futures, 5,000 oz. silver futures, options on gold and silver futures, and mini-sized 33.2 oz. gold and 1,000 oz. silver futures. NYSE Liffe US utilizes the proven LIFFE CONNECT® trading platform designed and maintained by NYSE Technologies.
• Expanding our U.S. futures business beyond gold and silver futures;
• Partnering with MSCI, a leader in the field of indices;
• Offering a suite of brand-new, stock-index products;
• Complementing the liquidity on the NYSE Arca platform in ETFs based on MSCI indices;
• Moving two of the MSCI index futures from the Chicago Mercantile Exchange in 2010; they will be dual listed until then; and
• Becoming more competitive and creating a U.S. futures exchange with a unique value proposition to firms, customers and the public.
Here's a Wall Street Journal online article about the news.
From the press release:
NYSE Liffe US, the new U.S. futures exchange of NYSE Euronext (NYX), today announced that it has signed a license agreement with MSCI Inc. (NYSE: MXB), a leading provider of investment decision support tools worldwide, to introduce a suite of domestic and international index futures products built on a range of MSCI Equity Indices. This unique and extensive portfolio of MSCI linked stock index futures will provide broad and efficient market coverage of U.S. and European equity markets, including style and sector exposures as well as coverage of flagship MSCI indices such as the MSCI Emerging Markets (EM), MSCI EAFE, and MSCI BRIC Indices.
These products represent NYSE Liffe US’ entry into a new asset class beyond the initial gold and silver contracts it opened with in September 2008. MSCI, which calculates over 120,000 equity indices daily, introduced its global equity benchmarks over 40 years ago. Today, the indices are recognized and used by leading asset managers around the world.
“This license agreement marks the beginning of a substantial commitment between two industry leaders in MSCI and NYSE Euronext to develop innovative products serving the needs of the global investment community,” said Duncan L. Niederauer, CEO, NYSE Euronext. “This exciting set of products fits strategically with NYSE Liffe US’ evolving value proposition and our commitment to building a premier US futures exchange.”
Henry Fernandez, Chairman and CEO, MSCI Inc., said, “We are very excited by this development. Over the last 40 years MSCI has built a successful franchise and an internationally recognized index brand. Our market-leading range of global investable and replicable benchmark indices is now an integral part of the investment processes of thousands of institutional investors around the world. By licensing a global exchange group like NYSE Euronext, many more investors will be able to access the MSCI Equity Indices via the futures marketplace.”
“In addition to the tremendous liquidity available on the NYSE Arca platform in ETFs based on MSCI indices, and combined with the margin efficiencies available at OCC, the MSCI family of indices are a natural and exciting core product set for NYSE Liffe US,” said Thomas F. Callahan, NYSE Euronext Executive Vice President, Head of U.S. Futures. “Adding futures products based on the MSCI EM and MSCI EAFE Indices to NYSE Liffe US is the first of many innovative futures products that we plan to introduce in the months ahead. NYSE Liffe US delivers credibility and innovation along with the liquidity, functionality and cost effectiveness that our clients demand.”
“We are delighted to have licensed NYSE Liffe US for the creation of futures contracts based on the MSCI Equity Indices,” said David Brierwood, Chief Operating Officer, MSCI Inc., “The availability of derivatives based on MSCI indices provides investors around the world with flexible tools to more effectively manage their equity portfolios.”
NYSE Liffe US launched trading in September 2008 as a fully electronic, liquid market for 100 oz. gold futures, 5,000 oz. silver futures, options on gold and silver futures, and mini-sized 33.2 oz. gold and 1,000 oz. silver futures. NYSE Liffe US utilizes the proven LIFFE CONNECT® trading platform designed and maintained by NYSE Technologies.
Saturday, May 23, 2009
'Stock Offerings Take Wing'
t's a warm, sunny pre-holiday Friday here, so I thought I'd offer a couple of bits of bright news:
Stock offerings take wing on NYSE Euronext (Business Week) Excerpt:
The dollar sizes are modest and there aren’t many of them, but initial public offerings and secondary stock offerings are showing a surprising bit of life. “I call it a streak in the first inning,” says Scott R. Cutler, an executive vice president at NYSE Euronext who runs the exchange company’s listing for the Americas.
Indeed, there have been some solid hits in the last few months culminating in the offering on May 20 for SolarWinds, an Austin (Texas)-based software provider. The outfit raised $151.5 million as it became the fifth domestic IPO to debut on the NYSE so far this year. Together, the five raised $1.4 billion.
Excited as traders are about this clutch of deals, they amount to a trickle compared with the recent offering high-water mark, set in 2007. Back then, over 230 U.S. offerings generated about $53 billion.
Nonetheless, the new deals seem like a torrent compared with a roughly eight-month stretch last year when virtually nothing was happening in the initial offering market.
Two Technology Offerings Find Favor on Wall Street (New York Times) Excerpt (and BTW, great photo from the NYSE trading floor!):
The dry spell in initial public offerings for venture-backed technology companies may be over. This week, two of those companies went public: OpenTable, the online restaurant reservation service, and SolarWinds, which makes network management software.
Investors gave both of them warm receptions. Shares of OpenTable, which began trading Thursday on Nasdaq, were originally priced at $20 and jumped 60 percent to close at $31.89. Shares of SolarWinds, which began trading Wednesday on the New York Stock Exchange, closed Thursday at $13.79, 10 percent above their offering price of $12.50.
Stock offerings take wing on NYSE Euronext (Business Week) Excerpt:
The dollar sizes are modest and there aren’t many of them, but initial public offerings and secondary stock offerings are showing a surprising bit of life. “I call it a streak in the first inning,” says Scott R. Cutler, an executive vice president at NYSE Euronext who runs the exchange company’s listing for the Americas.
Indeed, there have been some solid hits in the last few months culminating in the offering on May 20 for SolarWinds, an Austin (Texas)-based software provider. The outfit raised $151.5 million as it became the fifth domestic IPO to debut on the NYSE so far this year. Together, the five raised $1.4 billion.
Excited as traders are about this clutch of deals, they amount to a trickle compared with the recent offering high-water mark, set in 2007. Back then, over 230 U.S. offerings generated about $53 billion.
Nonetheless, the new deals seem like a torrent compared with a roughly eight-month stretch last year when virtually nothing was happening in the initial offering market.
Two Technology Offerings Find Favor on Wall Street (New York Times) Excerpt (and BTW, great photo from the NYSE trading floor!):
The dry spell in initial public offerings for venture-backed technology companies may be over. This week, two of those companies went public: OpenTable, the online restaurant reservation service, and SolarWinds, which makes network management software.
Investors gave both of them warm receptions. Shares of OpenTable, which began trading Thursday on Nasdaq, were originally priced at $20 and jumped 60 percent to close at $31.89. Shares of SolarWinds, which began trading Wednesday on the New York Stock Exchange, closed Thursday at $13.79, 10 percent above their offering price of $12.50.
'A Very Different and Dynamic Picture of Today's NYSE Trading Floor'
In the two-sides-to-every-story context, two letters representing the views of hundreds of NYSE floor brokers were sent to the Wall Street Journal to add a bit of balance and reality to an article that appeared in the newspaper’s May 4 edition. The Journal has not printed the letters, and since we feel it's a story worth telling, here are the letters. Feel free to weigh in, as the vast majority of NYSE floor brokers are proud of what they do for their customers.
In response to Mary Pilon's article, "The Big Bored: NYSE Traders Look For Diversions as Life Slows on Floor" (May 4), the Organization of Independent Floor Brokers (OIFB) would like to offer a very different and dynamic picture of today's NYSE trading floor.
The NYSE is an enduring symbol of the American economy. During the last three years, however, there has been a metamorphosis of the NYSE trading floor. The technology has changed, the market model has changed, and as we all have witnessed, the economy has changed. The majority of the NYSE floor based businesses have embraced these changes. Our business models have continuously evolved to better serve the investing public.
Ms. Pilon has chosen to focus on the woes of a small percentage of our community rather than the successful businesses that our members have built. After interviewing a cross-section of our community Ms. Pilon chose to incorporate only the comments that served her negative bias. She portrayed us as a community of pathetic, movie watching, lamenters of the past. Quite to the contrary, we are experienced business owners and practitioners who keep a constant eye to the future. Our businesses are successful, consisting of strategically positioned execution platforms. We spend our days involved in the diverse demands of business and are not "flat out bored."
We are extending an open invitation to any member of the press to spend time with us on the trading floor. We are eager to display our professional attitude and acumen. Finally, we are determined that we, the human part of today's marketplace, will evolve, prosper and continue to be an integral part of the world's capital markets for the foreseeable future.
Jonathan D. Corpina - President, OIFB
Jennifer I. Lee - Vice President, OIFB
Stephen O'Shaughnessy -- Board Member, OIFB
This letter is in response to the page one article entitled “The Big Bored: NYSE Traders Look for Diversions as Life Slows on Floor.” Unfortunately the reporter, Ms. Pilon, interviewed a small group of our community and grossly overstated the current situation. The floor now consists of Designated Market Makers (DMMs), House Brokers, and Independent Brokers. Ms. Pilon incorrectly described the community as being left behind the times by the increase in electronic trading. We have faced enormous challenges to our core business models over the last five years, yet we have found a way to adapt, survive and even thrive in this new trading environment.
Some of the more recent regulation changes including NMS forced our quotes to be electronically accessible which changed most of the trading that takes place on the floor from manual to electronic. Automation thins the numbers in any business, but with all change comes opportunity. It is true that our busiest time of day is during the open and close. Those prices, which are the standard to the entire financial industry, need to be manual transactions. Brokers and DMMs work hard each morning to “get the price right” by representing large institutional and retail order flow. While the floor seems quiet after the opening prints, it is also true that brokers have adapted to the new market structure.
True price discovery is still best accomplished by focusing supply and demand information to a single point of sale. Throughout the day brokers are finding innumerable ways to add value through price discovery and execution capability both electronically and manually.
Brokers on the floor still offer more information at the point of sale than any ECN could ever provide. Our community also has embraced the electronic world by creating a New Market Model in which agents (brokers) marry the benefits of parity with multiple order types and algorithms. This ability makes our marketplace truly unique. DMMs have replaced the specialist community and are finding new ways to show liquidity to institutional customers who seek blocks of stock. DMM participation is up over the last few months and the quality of our market place has grown stronger.
There may be some within our community that wish for it to return to the glory years of manual transactions and eighty percent market share. However, the financial community should know that the floor is here to stay. We have reinvented our business models and you would be remiss to ignore what we have to offer.
Patrick Armstrong
Daniel Tandy
Co-Presidents
Alliance of Floor Brokers
In response to Mary Pilon's article, "The Big Bored: NYSE Traders Look For Diversions as Life Slows on Floor" (May 4), the Organization of Independent Floor Brokers (OIFB) would like to offer a very different and dynamic picture of today's NYSE trading floor.
The NYSE is an enduring symbol of the American economy. During the last three years, however, there has been a metamorphosis of the NYSE trading floor. The technology has changed, the market model has changed, and as we all have witnessed, the economy has changed. The majority of the NYSE floor based businesses have embraced these changes. Our business models have continuously evolved to better serve the investing public.
Ms. Pilon has chosen to focus on the woes of a small percentage of our community rather than the successful businesses that our members have built. After interviewing a cross-section of our community Ms. Pilon chose to incorporate only the comments that served her negative bias. She portrayed us as a community of pathetic, movie watching, lamenters of the past. Quite to the contrary, we are experienced business owners and practitioners who keep a constant eye to the future. Our businesses are successful, consisting of strategically positioned execution platforms. We spend our days involved in the diverse demands of business and are not "flat out bored."
We are extending an open invitation to any member of the press to spend time with us on the trading floor. We are eager to display our professional attitude and acumen. Finally, we are determined that we, the human part of today's marketplace, will evolve, prosper and continue to be an integral part of the world's capital markets for the foreseeable future.
Jonathan D. Corpina - President, OIFB
Jennifer I. Lee - Vice President, OIFB
Stephen O'Shaughnessy -- Board Member, OIFB
This letter is in response to the page one article entitled “The Big Bored: NYSE Traders Look for Diversions as Life Slows on Floor.” Unfortunately the reporter, Ms. Pilon, interviewed a small group of our community and grossly overstated the current situation. The floor now consists of Designated Market Makers (DMMs), House Brokers, and Independent Brokers. Ms. Pilon incorrectly described the community as being left behind the times by the increase in electronic trading. We have faced enormous challenges to our core business models over the last five years, yet we have found a way to adapt, survive and even thrive in this new trading environment.
Some of the more recent regulation changes including NMS forced our quotes to be electronically accessible which changed most of the trading that takes place on the floor from manual to electronic. Automation thins the numbers in any business, but with all change comes opportunity. It is true that our busiest time of day is during the open and close. Those prices, which are the standard to the entire financial industry, need to be manual transactions. Brokers and DMMs work hard each morning to “get the price right” by representing large institutional and retail order flow. While the floor seems quiet after the opening prints, it is also true that brokers have adapted to the new market structure.
True price discovery is still best accomplished by focusing supply and demand information to a single point of sale. Throughout the day brokers are finding innumerable ways to add value through price discovery and execution capability both electronically and manually.
Brokers on the floor still offer more information at the point of sale than any ECN could ever provide. Our community also has embraced the electronic world by creating a New Market Model in which agents (brokers) marry the benefits of parity with multiple order types and algorithms. This ability makes our marketplace truly unique. DMMs have replaced the specialist community and are finding new ways to show liquidity to institutional customers who seek blocks of stock. DMM participation is up over the last few months and the quality of our market place has grown stronger.
There may be some within our community that wish for it to return to the glory years of manual transactions and eighty percent market share. However, the financial community should know that the floor is here to stay. We have reinvented our business models and you would be remiss to ignore what we have to offer.
Patrick Armstrong
Daniel Tandy
Co-Presidents
Alliance of Floor Brokers
Friday, May 22, 2009
NYSE Euronext Rolls Out Sponsored Deep Value Algorithms to Trading Floor Brokers
NYSE Euronext Rolls Out Sponsored Deep Value Algorithms to Trading Floor Brokers
-- Offering Greater Choice and Flexibility to Serve Customer Needs --
NEW YORK, May 21, 2009 – NYSE Euronext (NYX) has completed the roll out of the first phase of more than 20 execution algorithms provided by Deep Value Inc., adding to its already highly successful floor broker algorithm initiative. Since the program’s inception in July 2008, trading floor brokers have utilized algorithmic execution strategies directly from their hand-held devices to supplement their high-touch service with uniquely engineered automation. All algo strategies are available for use by floor brokers trading NYSE- and NYSE Amex-listed issues.
“Deep Value brings a highly innovative approach to algorithmic trading. Designed in collaboration with floor brokers, this initial suite of Deep Value algorithms introduces the concept of microstrategies™: sophisticated quoting and execution strategies that automate the rapid and intuitive characteristics found in the trading tactics of floor brokers,” said Michael Rutigliano, Vice President-Broker Liaison, NYSE Euronext. “These customized strategies, designed exclusively for floor brokers, strengthen brokers’ automated abilities, enable the brokers to engage in sophisticated new behaviors to deliver performance, seek and attract dark and block-sized liquidity, and provide significant price improvement. This is yet another step in the Exchanges’ ongoing commitment to provide customers who utilize floor brokers with richer and more diverse execution choices.”
“These unusual times in the world economies and U.S. markets have created a compelling need for human judgment and experience in the trading function. Market fragmentation and the millisecond timescales of market operation, on the other hand, demand good automation,” said Harish Devarajan, Managing Director of Deep Value. “Where previously customers could essentially only choose one or the other, we are now providing an array of sophisticated algorithms and narrower computer-driven tactics that brokers can use as automated assistants to serve their customers better.”
The NYSE last week completed the phase I release floor wide. Deep Value servers are co-located in NYSE Euronext’s data centers and directly utilize NYSE Technologies’ Super Feed market data to minimize latency and maximize the value of the algorithms to the floor broker community and their customers. Deep Value’s fault-tolerant technology handles the exchange-scale algorithmic loads via a NYSE-dedicated grid of commodity servers. All Deep Value strategies trade at parity, providing brokers the continuing ability to match on every trade. The algorithms are customizable and enable brokers to use their current execution and quoting strategies simultaneously. All strategies compete with the National Best Bid and Offer and are Regulation NMS compliant.
If you use floor brokers to help you execute your trading strategies (or are considering doing so), you might want to speak with a broker about how their algorithmic capabilities can help them best represent your orders.
-- Offering Greater Choice and Flexibility to Serve Customer Needs --
NEW YORK, May 21, 2009 – NYSE Euronext (NYX) has completed the roll out of the first phase of more than 20 execution algorithms provided by Deep Value Inc., adding to its already highly successful floor broker algorithm initiative. Since the program’s inception in July 2008, trading floor brokers have utilized algorithmic execution strategies directly from their hand-held devices to supplement their high-touch service with uniquely engineered automation. All algo strategies are available for use by floor brokers trading NYSE- and NYSE Amex-listed issues.
“Deep Value brings a highly innovative approach to algorithmic trading. Designed in collaboration with floor brokers, this initial suite of Deep Value algorithms introduces the concept of microstrategies™: sophisticated quoting and execution strategies that automate the rapid and intuitive characteristics found in the trading tactics of floor brokers,” said Michael Rutigliano, Vice President-Broker Liaison, NYSE Euronext. “These customized strategies, designed exclusively for floor brokers, strengthen brokers’ automated abilities, enable the brokers to engage in sophisticated new behaviors to deliver performance, seek and attract dark and block-sized liquidity, and provide significant price improvement. This is yet another step in the Exchanges’ ongoing commitment to provide customers who utilize floor brokers with richer and more diverse execution choices.”
“These unusual times in the world economies and U.S. markets have created a compelling need for human judgment and experience in the trading function. Market fragmentation and the millisecond timescales of market operation, on the other hand, demand good automation,” said Harish Devarajan, Managing Director of Deep Value. “Where previously customers could essentially only choose one or the other, we are now providing an array of sophisticated algorithms and narrower computer-driven tactics that brokers can use as automated assistants to serve their customers better.”
The NYSE last week completed the phase I release floor wide. Deep Value servers are co-located in NYSE Euronext’s data centers and directly utilize NYSE Technologies’ Super Feed market data to minimize latency and maximize the value of the algorithms to the floor broker community and their customers. Deep Value’s fault-tolerant technology handles the exchange-scale algorithmic loads via a NYSE-dedicated grid of commodity servers. All Deep Value strategies trade at parity, providing brokers the continuing ability to match on every trade. The algorithms are customizable and enable brokers to use their current execution and quoting strategies simultaneously. All strategies compete with the National Best Bid and Offer and are Regulation NMS compliant.
If you use floor brokers to help you execute your trading strategies (or are considering doing so), you might want to speak with a broker about how their algorithmic capabilities can help them best represent your orders.
Wednesday, May 20, 2009
Better Functionality thru a NEW Options Order Type
From Todd Wilemon: At NYSE Arca and Amex options exchanges, our goal is simple: we want to be the exchanges where the world trades options. Whether you want to trade on a price-time maker-taker exchange or on a traditional exchange with customer priority and pro rata allocation for market makers, we are striving through increased functionality and unique order types to make our exchanges your first destination. To make this happen, we are expanding the number and type of orders you can use on our exchanges.
Well without further ado, I give you our newest order type. Drum roll, please! Please put your hands together, off your seat and on your feet, ladies and gentlemen I give you the …”WAIT Order!” Please keep that applause coming and be sure to tip your waitress and bartender. You are going to love this order type. I dare say it might revolutionize how and where you trade options.
What is a “WAIT Order?” A WAIT Order will be processed one second after our matching engine receives the order. This means a WAIT Order will be held for one second before it will be processed for potential display, execution or routing. Why does this order type matter? The SEC requires that any order must be displayed for one second prior to being traded against by the same firm. The WAIT order guarantees that if a firm wants to facilitate customer order flow, they can enter a customer order and a WAIT order at the same time, and the customer order will be exposed for at least one second, giving everyone a chance to trade against it, prior to that customer order trading with a WAIT order.
WAIT orders must be limit orders; market orders do not qualify. Customer orders cannot be WAIT orders. Only Firms and Market Makers can use the new WAIT order. This makes sense because all customer-designated orders must be executed or displayed when received by the exchange.
WAIT orders can have different “time in force” TIF parameters. They can be day, GTC (good 'til cancelled), IOC (immediate or cancel) or FOK (fill or kill). They also can have different execution and display instructions. With the exception of the IOC time in force, WAIT orders can also interact with the AON (all or none) order book.
While WAIT orders can be canceled at any time, cancel/replace is not an option. If the option series halts or closes during the one second WAIT period, the WAIT order will cancel back to the sender.
The WAIT order type can help order sending firms interact and participate against their customers’ orders while ensuring that SEC requirements for exposure to the marketplace are upheld. Not only do our exchanges have the highest throughput and lowest latency, we now have unique order types to help increase your business.
We are always open to suggestions about functionality, new order types and other ways to improve. Ideas are always welcome. Enjoy your WAIT order, and check back soon for more news about innovative order types that are coming to NYSE Arca and NYSE Amex options.
Trade ‘em up!
TW.
Well without further ado, I give you our newest order type. Drum roll, please! Please put your hands together, off your seat and on your feet, ladies and gentlemen I give you the …”WAIT Order!” Please keep that applause coming and be sure to tip your waitress and bartender. You are going to love this order type. I dare say it might revolutionize how and where you trade options.
What is a “WAIT Order?” A WAIT Order will be processed one second after our matching engine receives the order. This means a WAIT Order will be held for one second before it will be processed for potential display, execution or routing. Why does this order type matter? The SEC requires that any order must be displayed for one second prior to being traded against by the same firm. The WAIT order guarantees that if a firm wants to facilitate customer order flow, they can enter a customer order and a WAIT order at the same time, and the customer order will be exposed for at least one second, giving everyone a chance to trade against it, prior to that customer order trading with a WAIT order.
WAIT orders must be limit orders; market orders do not qualify. Customer orders cannot be WAIT orders. Only Firms and Market Makers can use the new WAIT order. This makes sense because all customer-designated orders must be executed or displayed when received by the exchange.
WAIT orders can have different “time in force” TIF parameters. They can be day, GTC (good 'til cancelled), IOC (immediate or cancel) or FOK (fill or kill). They also can have different execution and display instructions. With the exception of the IOC time in force, WAIT orders can also interact with the AON (all or none) order book.
While WAIT orders can be canceled at any time, cancel/replace is not an option. If the option series halts or closes during the one second WAIT period, the WAIT order will cancel back to the sender.
The WAIT order type can help order sending firms interact and participate against their customers’ orders while ensuring that SEC requirements for exposure to the marketplace are upheld. Not only do our exchanges have the highest throughput and lowest latency, we now have unique order types to help increase your business.
We are always open to suggestions about functionality, new order types and other ways to improve. Ideas are always welcome. Enjoy your WAIT order, and check back soon for more news about innovative order types that are coming to NYSE Arca and NYSE Amex options.
Trade ‘em up!
TW.
Tuesday, May 19, 2009
'Direct Edge's ELP Program Causing Market Brouhaha'; 'Private Exchanges Looking to Turn Back Clock'
Securities Industry News reports, "Direct Edge's ELP Program Causing Market Brouhaha; Competitors criticize Enhanced Liquidity Provider program." Excerpts:
With its execution volume increasing, Direct Edge's three-year-old program that flashes orders to a private network of broker-dealers before routing them to other quoting markets, is generating calls for regulatory review of the practice as well as the broader notion of dark liquidity.
Direct Edge filed an official application May 7 to convert its two electronic communications networks, EDGX and EDGA, to full-fledged equities exchanges. This was preceded by months of discussion with Securities and Exchange Commission staff to tailor the proposal, which includes the ECNs' Enhanced Liquidity Provider mechanism for flashing to its broker-dealer network, to meet the stricter regulatory requirements for exchanges. Direct Edge's filing indicates approval is likely, arousing criticism from competitors who believe the pre-order routing system may violate regulations.
The ELP program, launched in spring 2006, briefly flashes orders that can't be filled on Direct Edge's ECNs to 25 broker-dealers, giving them the opportunity to execute the orders before they are routed to other quote-displaying markets
"The volume of dark liquidity has grown very quickly and could result in a two-tiered market, where some participants are getting information that others aren't," said Joe Mecane, executive vice president and chief administrative officer for U.S. markets at NYSE Euronext, adding, "There are a lot of inconsistent practices between the exchanges and (automated trading systems), and we'd expect at some point that the regulators will aim for a more equal playing field."
But it's not just competitors (including NYSE Euronext) questioning this practice:
Flashing orders to a select group, even if the group is not limited by the market center's rules, runs contrary to other regulations, though, said Jamie Selway, managing director at White Cap Trading and former chief economist at Archipelago, one of the pioneering ECNs.
"In terms of Reg ATS, this practically violates the first principle -- that a large marketplace can display an order to one participant, but if it displays it to multiple participants it should be in a public quote," he said.
On a somewhat related note, Reuters reports, "Private exchanges looking to turn back the clock." Excerpts:
A new era in stock exchanges may be on the horizon -- and it looks something like the past, when a small handful of owners ran important capital markets.
...
Executives at the Reuters Exchanges and Trading Summit this week raised the specter of a partial return to a system in which key marketplaces are run by a small group of powerful players.
New Jersey-based Direct Edge, which aims to be a formal exchange later this year, is owned by Goldman Sachs (GS.N), Knight Capital Group Inc (NITE.O), hedge fund giant Citadel, and options mart International Securities Exchange.
Kansas City-based BATS, which is already in Europe and is now eyeing options markets, is owned by several big investment banks including Citigroup (C.N), Credit Suisse Group (CSGN.VX), JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Deutsche Bank AG (DBKGn.DE).
"What that exchange then looks like is what I would call a 'semi-mutualized exchange,'" said Duncan Niederauer, CEO of NYSE Euronext, which has more than 30 percent market share.
"It starts to look like the old NYSE member-ownership model, which I think we all concluded was not a great outcome and actually was fraught with conflict."
"I think the SEC will ultimately re-look at some of these regulations," he said of dealers funneling orders to their exchange arms.
More to come on this, I'm sure.
With its execution volume increasing, Direct Edge's three-year-old program that flashes orders to a private network of broker-dealers before routing them to other quoting markets, is generating calls for regulatory review of the practice as well as the broader notion of dark liquidity.
Direct Edge filed an official application May 7 to convert its two electronic communications networks, EDGX and EDGA, to full-fledged equities exchanges. This was preceded by months of discussion with Securities and Exchange Commission staff to tailor the proposal, which includes the ECNs' Enhanced Liquidity Provider mechanism for flashing to its broker-dealer network, to meet the stricter regulatory requirements for exchanges. Direct Edge's filing indicates approval is likely, arousing criticism from competitors who believe the pre-order routing system may violate regulations.
The ELP program, launched in spring 2006, briefly flashes orders that can't be filled on Direct Edge's ECNs to 25 broker-dealers, giving them the opportunity to execute the orders before they are routed to other quote-displaying markets
"The volume of dark liquidity has grown very quickly and could result in a two-tiered market, where some participants are getting information that others aren't," said Joe Mecane, executive vice president and chief administrative officer for U.S. markets at NYSE Euronext, adding, "There are a lot of inconsistent practices between the exchanges and (automated trading systems), and we'd expect at some point that the regulators will aim for a more equal playing field."
But it's not just competitors (including NYSE Euronext) questioning this practice:
Flashing orders to a select group, even if the group is not limited by the market center's rules, runs contrary to other regulations, though, said Jamie Selway, managing director at White Cap Trading and former chief economist at Archipelago, one of the pioneering ECNs.
"In terms of Reg ATS, this practically violates the first principle -- that a large marketplace can display an order to one participant, but if it displays it to multiple participants it should be in a public quote," he said.
On a somewhat related note, Reuters reports, "Private exchanges looking to turn back the clock." Excerpts:
A new era in stock exchanges may be on the horizon -- and it looks something like the past, when a small handful of owners ran important capital markets.
...
Executives at the Reuters Exchanges and Trading Summit this week raised the specter of a partial return to a system in which key marketplaces are run by a small group of powerful players.
New Jersey-based Direct Edge, which aims to be a formal exchange later this year, is owned by Goldman Sachs (GS.N), Knight Capital Group Inc (NITE.O), hedge fund giant Citadel, and options mart International Securities Exchange.
Kansas City-based BATS, which is already in Europe and is now eyeing options markets, is owned by several big investment banks including Citigroup (C.N), Credit Suisse Group (CSGN.VX), JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Deutsche Bank AG (DBKGn.DE).
"What that exchange then looks like is what I would call a 'semi-mutualized exchange,'" said Duncan Niederauer, CEO of NYSE Euronext, which has more than 30 percent market share.
"It starts to look like the old NYSE member-ownership model, which I think we all concluded was not a great outcome and actually was fraught with conflict."
"I think the SEC will ultimately re-look at some of these regulations," he said of dealers funneling orders to their exchange arms.
More to come on this, I'm sure.
Saturday, May 16, 2009
The Secondary Markets are Humming
From Scott Cutler: If you haven't noticed, there has been a tremendous amount of capital raised in the last few weeks. A total of $60B has been raised in secondary offerings so far this year, with 2/3rd of that since April 1, and 50 percent ($30B) in the last two weeks. The five top deals account for about a third of all secondary capital raised. Wells Fargo--$7.5B, Goldman--$5B, Morgan Stanley--$4B, ArcelorMittal--$2.9B, and US Bancorp--$2.5B.
I don't think anyone is surprised about the need for additional capital by many of these firms, but it is still amazing that they could raise these amounts, and do it so quickly. Many predict that another $30B will be raised in the next several weeks. I had an interview today with Bob Pisani on CNBC to talk about my observations on the capital markets.
How could so much capital have been raised so quickly? I think we have a few things pushing this opportunity. First, in early March, we were looking at and concerned about the threat of financial Armageddon with fund managers putting all their capital in guns, gold, and cash. There is still a tremendous amount of cash sitting on the sidelines waiting to be deployed back in the market.
Second, since we hit the low in early March, the Dow has rallied 26%, with financials towing the market out of its depths. Wells Fargo is up 212% off its March low, Morgan Stanley up 62%, Goldman up 73%, and US Bancorp up 100%. Large institutional investors needed to get back in and in large quantities to protect against further dilution from the share issuances, but also participate in the run up. The ability of the large banks to execute significant offerings into that momentum without a material deterioration in share prices has been equally impressive.
What does this mean about the appetite for risk and the return to a healthy capital market? Clearly, these are positive signs for the overall health of our capital market system, but let's not get ahead of ourselves. The credit and debt markets are still tight, and the appetite for risk is still low. There is a tendency to chase this type of move into the market, but the underlying fundamentals of the business environment remain challenging. I am been pleased with the performance of our recent IPOs -- Mead Johnson, Bridgepoint, Rosetta Stone and Digital Globe from yesterday. All have traded above their offering prices -- and we have another IPO next week. I am also pleased that the NYSE has been the home to every domestic IPO so far this year and we will be four-for-four vs. the competition in technology IPOs. Is it time to party? No -- it is still an exclusive party, the ticket price is high, and you have to come well dressed.
I don't think anyone is surprised about the need for additional capital by many of these firms, but it is still amazing that they could raise these amounts, and do it so quickly. Many predict that another $30B will be raised in the next several weeks. I had an interview today with Bob Pisani on CNBC to talk about my observations on the capital markets.
How could so much capital have been raised so quickly? I think we have a few things pushing this opportunity. First, in early March, we were looking at and concerned about the threat of financial Armageddon with fund managers putting all their capital in guns, gold, and cash. There is still a tremendous amount of cash sitting on the sidelines waiting to be deployed back in the market.
Second, since we hit the low in early March, the Dow has rallied 26%, with financials towing the market out of its depths. Wells Fargo is up 212% off its March low, Morgan Stanley up 62%, Goldman up 73%, and US Bancorp up 100%. Large institutional investors needed to get back in and in large quantities to protect against further dilution from the share issuances, but also participate in the run up. The ability of the large banks to execute significant offerings into that momentum without a material deterioration in share prices has been equally impressive.
What does this mean about the appetite for risk and the return to a healthy capital market? Clearly, these are positive signs for the overall health of our capital market system, but let's not get ahead of ourselves. The credit and debt markets are still tight, and the appetite for risk is still low. There is a tendency to chase this type of move into the market, but the underlying fundamentals of the business environment remain challenging. I am been pleased with the performance of our recent IPOs -- Mead Johnson, Bridgepoint, Rosetta Stone and Digital Globe from yesterday. All have traded above their offering prices -- and we have another IPO next week. I am also pleased that the NYSE has been the home to every domestic IPO so far this year and we will be four-for-four vs. the competition in technology IPOs. Is it time to party? No -- it is still an exclusive party, the ticket price is high, and you have to come well dressed.
Wednesday, May 13, 2009
'We're Going to Have to Be Patient' About Obama's Economic Initiatives, Says NYX CEO
And Americans aren't good at being patient, NYSE Euronext CEO Duncan Niederauer said at a Financial Executives Institute summit last week, as he called for the nation to give the administration's plan some time to work.
His comments were reported yesterday in the Fort Worth Business Press, as were those of some of the other participants, including: Chris Ballinger, CFO of Toyota Financial Services; Richard Lindner, senior executive vice president and CFO of AT&T Inc.; Patrick Mulva, vice president and controller of Exxon Mobil Corp.; and Laura Wright, senior vice president and CFO of Southwest Airlines Co.
An excerpt:
“Government intervention was necessary,” Niederauer said. “And we’re going to have to be patient. Americans aren’t good at that. But, we need to keep encouraging the Obama administration to overcommunicate the way he did during the campaign.”
Communication from the Obama administration is key to keeping the public, investors and key players in the finance and banking industries calm and informed about the government’s plans, he said.
But, in order to restore confidence in investors, consumer confidence will have to be restored first so people will be comfortable spending money on investments, he said.
“Right now people are worried about the roof over their head, about their family and whether they can support them; those are the three things they’re worried about,” Niederauer said.
Also:
Niederauer said his one criticism of Obama’s stimulus plan was that it isn’t geared enough toward small businesses, which he said have been the “economic engines” that have brought the United States out of all of its economic troubles. Small businesses are more likely to create jobs in a down economy than a large corporation, he said, and added in order to create jobs, small businesses need extra help right now.
Niederauer also went over his opinions on regulation efforts that may come out of the financial crisis, including any new regulations that may be geared toward companies dealing in credit default swaps and other exotic securities and financial instruments.
“If all we do is over-regulate, that’s going to be an unfortunate outcome,” he said.
His comments were reported yesterday in the Fort Worth Business Press, as were those of some of the other participants, including: Chris Ballinger, CFO of Toyota Financial Services; Richard Lindner, senior executive vice president and CFO of AT&T Inc.; Patrick Mulva, vice president and controller of Exxon Mobil Corp.; and Laura Wright, senior vice president and CFO of Southwest Airlines Co.
An excerpt:
“Government intervention was necessary,” Niederauer said. “And we’re going to have to be patient. Americans aren’t good at that. But, we need to keep encouraging the Obama administration to overcommunicate the way he did during the campaign.”
Communication from the Obama administration is key to keeping the public, investors and key players in the finance and banking industries calm and informed about the government’s plans, he said.
But, in order to restore confidence in investors, consumer confidence will have to be restored first so people will be comfortable spending money on investments, he said.
“Right now people are worried about the roof over their head, about their family and whether they can support them; those are the three things they’re worried about,” Niederauer said.
Also:
Niederauer said his one criticism of Obama’s stimulus plan was that it isn’t geared enough toward small businesses, which he said have been the “economic engines” that have brought the United States out of all of its economic troubles. Small businesses are more likely to create jobs in a down economy than a large corporation, he said, and added in order to create jobs, small businesses need extra help right now.
Niederauer also went over his opinions on regulation efforts that may come out of the financial crisis, including any new regulations that may be geared toward companies dealing in credit default swaps and other exotic securities and financial instruments.
“If all we do is over-regulate, that’s going to be an unfortunate outcome,” he said.
Tuesday, May 12, 2009
Bigger Quotes at NYSE; New Order Type at NYSE Arca; Better Openings at NYSE Amex; and More
Our new U.S. Equities newsletter is out, and among other things it reports significant progress at NYSE, including:
• The average size of our quote improved to 1,381 shares in March from 771 in August 2008, a 79% increase.
• In the top 100 issues, quoted size surged to 13,440 shares on NYSE from 4,030 in November.
• Outbound routing dropped to 9.1%, and for the top 100 issues it fell to 10.6% from 13.0%. The March 2009 levels are the lowest since March 2008.
• The percentage of time that our Designated Market Makers' quotes were at the national best bid or offer more than doubled to 25.0 percent in March 2009 from 9.9 percent in August of 2008.
• The DMMs' participation rate increased to 9.0 percent from 3.2 percent during that period
There's more in the original article.
The newsletter also covers:
• The new incentive program for traders of precious-metals futures and exchange-traded products;
• NYSE Amex's superior opening auction;
• New Add Liquidity Only order type on NYSE Arca, and greater use of Indications of Interest;
• Coming events and more.
Hope you find it informative. And hope you're making it through Monday.
• The average size of our quote improved to 1,381 shares in March from 771 in August 2008, a 79% increase.
• In the top 100 issues, quoted size surged to 13,440 shares on NYSE from 4,030 in November.
• Outbound routing dropped to 9.1%, and for the top 100 issues it fell to 10.6% from 13.0%. The March 2009 levels are the lowest since March 2008.
• The percentage of time that our Designated Market Makers' quotes were at the national best bid or offer more than doubled to 25.0 percent in March 2009 from 9.9 percent in August of 2008.
• The DMMs' participation rate increased to 9.0 percent from 3.2 percent during that period
There's more in the original article.
The newsletter also covers:
• The new incentive program for traders of precious-metals futures and exchange-traded products;
• NYSE Amex's superior opening auction;
• New Add Liquidity Only order type on NYSE Arca, and greater use of Indications of Interest;
• Coming events and more.
Hope you find it informative. And hope you're making it through Monday.
How a Floor Broker Can Help You
Longtime NYSE member Bernie McSherry has a lengthy, terrific video interview on Forbes.com. You have to sit through two commercials and a Steve Forbes tax editorial before getting to the interview, but it's worth it.
Bernie talks about high-touch trading, the uptick rule, Crash of '87, credit-default-swap trading and regulation, and more. One particularly relevant excerpt
STEVE FORBES: Now, you've made the observation that on heavily traded stocks like a Microsoft, you really may not need human beings, that the electronics can work perfectly well, but in less traded stocks, there is a role to play. Do you think we need perhaps a new exchange for smaller stocks and just have a one-tier, two-tier, four-tier kind of exchange? One electronic, one semi-human, one fully human?
BERNIE MCSHERRY: Yes, I think something like that is we're in the process of evolving towards that now. The big names that are very liquid, there's not a lot of money that a broker can save for you. You know, if something is offered at 30 cents in very large size, I'm probably going to pay 30 cents when I get there and I'm not going to really make a difference. ButSTEVE FORBES: And is that something recognized by regulators, something to be encouraged? Or are they just sort of taking hands off and watching it all unfold?
BERNIE MCSHERRY: Well, I think initially there was a bit of a bias against the exchange in the terms of I guess the exchange was probably not embracing change for quite some time.
STEVE FORBES: Right.
BERNIE MCSHERRY: And the regulators wanted to nudge them along and were not really listening to their arguments very well. Now that we've come through a particularly volatile period, I think there's some recognition that it's a good idea to have a central market of some sort. It's easier to regulate. It's better pricing. And we've had a proliferation of market centers. There are probably 30 or so out there now. And it's very difficult for people to trade large blocks of stock because it's so fragmented. So I think the momentum is swinging back a little bit, and we'll see. But I think the regulators would probably prefer to see a little more consolidation.
STEVE FORBES: And in terms of trading large blocks, some advances have been made. Maybe you can touch on those, or at least changes, whether you call them advances or not depends on your perspective, but changes. And what more changes do you think? You mentioned block traders don't want to have their hands revealed. And they're always trying to find ways, dark pools and the like, to figure out ways to have their strategy unfold without people seeing it unfold, in effect.
BERNIE MCSHERRY: Right. Well, that's one of the benefits of human trading. People develop relationships over time, colleagues, competitors. You have a reputational effect when you walk into a crowd. And if you squander that, you're going to have a hard time getting information.
Brokers used to do a mating dance. They'd walk into the crowd and say, "Well, I'm a buyer." And then somebody would respond and say, "Well, I'm a pretty good seller." And then the buyer would respond by saying, "Well, I have a fairly large buy order." And then the seller would say, "You know, I'm not afraid of a size bid." And in a matter of seconds, they could print a million shares or so on the tape, get it traded at a fair price for everybody in a way that didn't reveal their hands to people who were outside of that actual trade.
In an electronic system, if you try to put a bid like that into a system, everybody in the world sees it. They run in front of it and drive the price up or down in front of you. So they haven't really been able to replicate that exactly. There are some efforts now. The New York Block Exchange is an example.
There are a few other systems that are trying to come up with a way of replicating that dynamic. But it's very difficult when somebody is involved anonymously with it because there's no real penalty to be paid if you don't behave well.
STEVE FORBES: So there's no real way yet to chop up a block and have it done in a way where people aren't figured out what's going on?
BERNIE MCSHERRY: Right. People are slicing them up and they're getting them into the market. But it takes a lot longer time. The price impact is far more uncertain. And there are some systems that have been developed to bring buyers and sellers together. But they are not as effective as the old way just yet. But people are working on it. I have no doubt that technology will catch up at some point.
Bernie talks about high-touch trading, the uptick rule, Crash of '87, credit-default-swap trading and regulation, and more. One particularly relevant excerpt
STEVE FORBES: Now, you've made the observation that on heavily traded stocks like a Microsoft, you really may not need human beings, that the electronics can work perfectly well, but in less traded stocks, there is a role to play. Do you think we need perhaps a new exchange for smaller stocks and just have a one-tier, two-tier, four-tier kind of exchange? One electronic, one semi-human, one fully human?
BERNIE MCSHERRY: Yes, I think something like that is we're in the process of evolving towards that now. The big names that are very liquid, there's not a lot of money that a broker can save for you. You know, if something is offered at 30 cents in very large size, I'm probably going to pay 30 cents when I get there and I'm not going to really make a difference. ButSTEVE FORBES: And is that something recognized by regulators, something to be encouraged? Or are they just sort of taking hands off and watching it all unfold?
BERNIE MCSHERRY: Well, I think initially there was a bit of a bias against the exchange in the terms of I guess the exchange was probably not embracing change for quite some time.
STEVE FORBES: Right.
BERNIE MCSHERRY: And the regulators wanted to nudge them along and were not really listening to their arguments very well. Now that we've come through a particularly volatile period, I think there's some recognition that it's a good idea to have a central market of some sort. It's easier to regulate. It's better pricing. And we've had a proliferation of market centers. There are probably 30 or so out there now. And it's very difficult for people to trade large blocks of stock because it's so fragmented. So I think the momentum is swinging back a little bit, and we'll see. But I think the regulators would probably prefer to see a little more consolidation.
STEVE FORBES: And in terms of trading large blocks, some advances have been made. Maybe you can touch on those, or at least changes, whether you call them advances or not depends on your perspective, but changes. And what more changes do you think? You mentioned block traders don't want to have their hands revealed. And they're always trying to find ways, dark pools and the like, to figure out ways to have their strategy unfold without people seeing it unfold, in effect.
BERNIE MCSHERRY: Right. Well, that's one of the benefits of human trading. People develop relationships over time, colleagues, competitors. You have a reputational effect when you walk into a crowd. And if you squander that, you're going to have a hard time getting information.
Brokers used to do a mating dance. They'd walk into the crowd and say, "Well, I'm a buyer." And then somebody would respond and say, "Well, I'm a pretty good seller." And then the buyer would respond by saying, "Well, I have a fairly large buy order." And then the seller would say, "You know, I'm not afraid of a size bid." And in a matter of seconds, they could print a million shares or so on the tape, get it traded at a fair price for everybody in a way that didn't reveal their hands to people who were outside of that actual trade.
In an electronic system, if you try to put a bid like that into a system, everybody in the world sees it. They run in front of it and drive the price up or down in front of you. So they haven't really been able to replicate that exactly. There are some efforts now. The New York Block Exchange is an example.
There are a few other systems that are trying to come up with a way of replicating that dynamic. But it's very difficult when somebody is involved anonymously with it because there's no real penalty to be paid if you don't behave well.
STEVE FORBES: So there's no real way yet to chop up a block and have it done in a way where people aren't figured out what's going on?
BERNIE MCSHERRY: Right. People are slicing them up and they're getting them into the market. But it takes a lot longer time. The price impact is far more uncertain. And there are some systems that have been developed to bring buyers and sellers together. But they are not as effective as the old way just yet. But people are working on it. I have no doubt that technology will catch up at some point.
Saturday, May 9, 2009
Report from the Options Industry Conference: Growth, Transparency and Other Issues
From Todd Wilemon: The options industry wrapped up its annual get-together this last weekend in South Florida. The best news from the conference is that our industry is strong and still growing, even during the financial crisis.
I am always appreciative when sessions during these conferences are interesting. Again, good news: all were informative, most were quite interesting and a few were even entertaining — I’ll give you a few highlights.
Elizabeth King of the Securities and Exchange Commission started off the conference briefing us on how the SEC was dealing with the increased calls to limit short selling of stocks. New rules governing short selling are being formulated as you read this. What is unknown is whether Option Market Makers will continue to be exempt from short-sale rules when making markets and trading. Good news is that SEC is still in comment phase, so let them know what you think!
Innovation on the technology front continues to drive markets and trading to ever faster speeds. As trading has moved from floor to the electronic environments, speed and latency are more important than ever. During the session on “Messaging: The Key to Being Faster,” it was pointed out how networks and bandwidth constraints contributed to latency in the past. The new constraint is the number and interaction of different applications traders are using to make markets and trade.
Continuing on the theme of technology, the next session addressed “Challenges in Today’s Environment.” The discussion centered on how firms were coping with all of the electronic messages that each of the seven options exchanges generate and send out every second. OPRA and the OCC are both ramping up capacity to keep ahead of the ever-increasing onslaught of information.
The best session was the leadership panel. Heads of all exchanges plus John J. Lothian gave a bravo performance on where our industry is at and where we are headed. A little good-natured ribbing made for a humorous panel.
Some of the topics addressed on this panel: How many options exchanges do you need? (Answer: Several). Speculation is that more exchanges will be opening to trade listed options. What is the best exchange model — market maker pro rata allocation or price/time make/take model, or should each exchange operator operate both types? There was even some light banter about what a third market model might look like.
One serious topic that was addressed was the need to protect the options industry’s legacy of providing transparent markets. Going forward, transparency must be protected with the continued proliferation of multiple exchanges, aggregators, and the potential use of dark pools, including the current availability of dark pennies at one of the exchanges. “If we destroy transparency in the U.S.,” warned Ed Boyle, VP of US Options, NYSE Euronext, “we will see the options industry shrink and it could ultimately disappear.”
A wonderful panel including Jorge Alegria, the head of the Mexican Derivatives Exchange, gave an international perspective to our business. One of the growth areas for options is outside the United States. Education for both the retail and institutional customer will help grow trading in listed options internationally. Otto Naegeli, the U.S. “ambassador” to Europe for the Options Industry Council, mentioned that there is a big push in Europe going on right now to bring OIC–style educational content and seminars to the investing public in Europe, which is great news.
On everybody’s mind was the economy and market meltdown. David Marshal, VP of the Federal Reserve Bank of Chicago, tried to shed light on what happened and how the Fed is dealing with the consequences. So what happened? A perfect storm of over-capacity at the end of a real-estate boom that was based on excessive home valuations made possible by the securitization of sub-prime mortgages. He showed that while the Federal Reserve balance sheet has increased from billions to trillions of dollars of loans outstanding, most of the increase was short term in nature. As banks and the economy grow stronger, most of the loans will be repaid instead of being rolled over. All I have to say is good, pay those loans back!
An important takeaway is that while option trading volume did slip during the worst months of the recent economic crisis, it has already recovered. 2009 will be another year of increasing volume in our industry. Our industry is still young and the future continues to be bright.
Next year’s conference is in beautiful Phoenix. If you are an industry professional, I encourage you to attend; it is well worth your time.
See you in Phoenix!
TW
Comments
I am always appreciative when sessions during these conferences are interesting. Again, good news: all were informative, most were quite interesting and a few were even entertaining — I’ll give you a few highlights.
Elizabeth King of the Securities and Exchange Commission started off the conference briefing us on how the SEC was dealing with the increased calls to limit short selling of stocks. New rules governing short selling are being formulated as you read this. What is unknown is whether Option Market Makers will continue to be exempt from short-sale rules when making markets and trading. Good news is that SEC is still in comment phase, so let them know what you think!
Innovation on the technology front continues to drive markets and trading to ever faster speeds. As trading has moved from floor to the electronic environments, speed and latency are more important than ever. During the session on “Messaging: The Key to Being Faster,” it was pointed out how networks and bandwidth constraints contributed to latency in the past. The new constraint is the number and interaction of different applications traders are using to make markets and trade.
Continuing on the theme of technology, the next session addressed “Challenges in Today’s Environment.” The discussion centered on how firms were coping with all of the electronic messages that each of the seven options exchanges generate and send out every second. OPRA and the OCC are both ramping up capacity to keep ahead of the ever-increasing onslaught of information.
The best session was the leadership panel. Heads of all exchanges plus John J. Lothian gave a bravo performance on where our industry is at and where we are headed. A little good-natured ribbing made for a humorous panel.
Some of the topics addressed on this panel: How many options exchanges do you need? (Answer: Several). Speculation is that more exchanges will be opening to trade listed options. What is the best exchange model — market maker pro rata allocation or price/time make/take model, or should each exchange operator operate both types? There was even some light banter about what a third market model might look like.
One serious topic that was addressed was the need to protect the options industry’s legacy of providing transparent markets. Going forward, transparency must be protected with the continued proliferation of multiple exchanges, aggregators, and the potential use of dark pools, including the current availability of dark pennies at one of the exchanges. “If we destroy transparency in the U.S.,” warned Ed Boyle, VP of US Options, NYSE Euronext, “we will see the options industry shrink and it could ultimately disappear.”
A wonderful panel including Jorge Alegria, the head of the Mexican Derivatives Exchange, gave an international perspective to our business. One of the growth areas for options is outside the United States. Education for both the retail and institutional customer will help grow trading in listed options internationally. Otto Naegeli, the U.S. “ambassador” to Europe for the Options Industry Council, mentioned that there is a big push in Europe going on right now to bring OIC–style educational content and seminars to the investing public in Europe, which is great news.
On everybody’s mind was the economy and market meltdown. David Marshal, VP of the Federal Reserve Bank of Chicago, tried to shed light on what happened and how the Fed is dealing with the consequences. So what happened? A perfect storm of over-capacity at the end of a real-estate boom that was based on excessive home valuations made possible by the securitization of sub-prime mortgages. He showed that while the Federal Reserve balance sheet has increased from billions to trillions of dollars of loans outstanding, most of the increase was short term in nature. As banks and the economy grow stronger, most of the loans will be repaid instead of being rolled over. All I have to say is good, pay those loans back!
An important takeaway is that while option trading volume did slip during the worst months of the recent economic crisis, it has already recovered. 2009 will be another year of increasing volume in our industry. Our industry is still young and the future continues to be bright.
Next year’s conference is in beautiful Phoenix. If you are an industry professional, I encourage you to attend; it is well worth your time.
See you in Phoenix!
TW
Comments
'Are The Public Markets Finally Beginning to Thaw?'
The market for initial public offerings is still difficult to access for start-ups, but there are signs the window finally may be opening, our CEO Duncan Niederauer and U.S. Listings chief Scott Cutler told a group of reporters in our Palo Alto, Calif. office yesterday
From the Wall Street Journal's Venture Capital Dispatch blog
“I’ve seen signs of the window finally opening,” Niederauer said. “That’s partly attributable to the tone of the market being better.”
Volatility in the market has also dropped, which makes pricing IPOs easier, said Scott Cutler, executive vice president of the NYSE’s global corporate client group.
However, companies still need to meet certain criteria to have success in an IPO, including being in a growth industry, having a dominant and unique position in that market, and a “realistic” view of their own valuation, Niederauer said.
The last venture-backed IPO was Rackspace US Inc. However, there have been two recent non-VC-backed IPOs on the NYSE: Rosetta Stone Ltd. and Bridgepoint Education Inc.
The NYSE expects two IPOs soon, including SolarWinds Inc., which last month announced plans to sell 12.1 million shares at an estimated price range of $9.50 to $11.50 a share, putting it in line to possibly be the first venture-backed IPO since Rackspace.
The other expected to soon list on the NYSE is DigitalGlobe Inc. Competing to list first is venture-backed OpenTable Inc., which plans to debut on the Nasdaq.
The same post also discusses:
-- How NYSE and NYSE Amex are become destinations for VC-backed IPOs.
-- Companies' concerns about regulation making it more difficult to access public markets.
-- NYSE looking to accounting firms to help make it less expensive for companies to go public.
-- And more.
Happy Friday, folks. I know, I know. I'm sorry. I've fallen off the beam here. Will try to get back to blogging so frequently that you beg me to stop. In the meantime, have a great weekend
From the Wall Street Journal's Venture Capital Dispatch blog
“I’ve seen signs of the window finally opening,” Niederauer said. “That’s partly attributable to the tone of the market being better.”
Volatility in the market has also dropped, which makes pricing IPOs easier, said Scott Cutler, executive vice president of the NYSE’s global corporate client group.
However, companies still need to meet certain criteria to have success in an IPO, including being in a growth industry, having a dominant and unique position in that market, and a “realistic” view of their own valuation, Niederauer said.
The last venture-backed IPO was Rackspace US Inc. However, there have been two recent non-VC-backed IPOs on the NYSE: Rosetta Stone Ltd. and Bridgepoint Education Inc.
The NYSE expects two IPOs soon, including SolarWinds Inc., which last month announced plans to sell 12.1 million shares at an estimated price range of $9.50 to $11.50 a share, putting it in line to possibly be the first venture-backed IPO since Rackspace.
The other expected to soon list on the NYSE is DigitalGlobe Inc. Competing to list first is venture-backed OpenTable Inc., which plans to debut on the Nasdaq.
The same post also discusses:
-- How NYSE and NYSE Amex are become destinations for VC-backed IPOs.
-- Companies' concerns about regulation making it more difficult to access public markets.
-- NYSE looking to accounting firms to help make it less expensive for companies to go public.
-- And more.
Happy Friday, folks. I know, I know. I'm sorry. I've fallen off the beam here. Will try to get back to blogging so frequently that you beg me to stop. In the meantime, have a great weekend
Thursday, May 7, 2009
THE NEW IPOS AND A CHANGING MARKET
New IPOs and a Changing Market
By: scutler
File Under: Listed Companies
From Scott Cutler: Everybody was watching this week to see if the IPO market could get some legs again. The successful debuts of Bridgepoint Education and Rosetta Stone on NYSE Euronext effectively doubled the number of IPOs we have seen in the market this year and will help to lay a foundation for a stronger market that is really important for our economy.
These two events highlighted the changes in and importance of investors, traders, pricing and the effects of IPOs on the overall economy. Here are my observations on what we learned. From Scott Cutler: Everybody was watching this week to see if the IPO market could get some legs again. The successful debuts of Bridgepoint Education and Rosetta Stone on NYSE Euronext effectively doubled the number of IPOs we have seen in the market this year and will help to lay a foundation for a stronger market that is really important for our economy.
These two events highlighted the changes in and importance of investors, traders, pricing and the effects of IPOs on the overall economy. Here are my observations on what we learned.
IPO investors are looking for a solid investment thesis built upon three prerequisite characteristics: participation in a growing industry, business execution and market leadership. Sounds simple, but the number of companies meeting all three are rare--so don't expect the floodgates to open all too soon. I do think others will follow in the coming months, and they will be able to thank these two pioneers for helping to lead the way. These transactions were also particularly important in shaping sentiment around the IPO asset class itself. Investors making money on IPOs starts the flywheel, and momentum is able to build on itself.
The management teams and bankers involved in the recent deals told us that the buyside players are changing. Many of the hedge funds and fast money players are gone, heralding a return of the long-term investor. This is important for the newly public company because it gives them the ability to create a better shareholder base aligned with their strategic objectives.
Pricing and valuation are obviously critical to the success of an IPO. Both deals this week seemed to price well relative to their public comps. In the past, this has been a major problem in the industry as management teams, boards, and investors pushed to get the highest valuation and the last dollar out of pricing. It set up an environment where two-thirds of the IPOs missed expectations the first or second quarter after listing. My advice to any company on valuation is to remember two things: First the IPO is not a sale of the company and Second, you are an unproven private company with higher risk--acknowledge that and prove the market wrong. The year-over-year valuation comparisons are getting easier so valuation may prove to be less of an obstacle going forward.
My last point is something we often forget to think about. The IPO is an important job engine for our economy. These two companies employ about 2,000 employees. Bridgepoint didn't exist five years ago. Rosetta Stone had 10mm in revenue five years ago. Both companies create jobs, provide for families and create wealth. We need the IPO market to work in our economy--an economy, if I remember, that was established on entrepreneurship and innovation.
So, kudos to these two for setting the stage. I, for one, feel more positive today than I did last week and who wouldn't want a change in sentiment after the winter we have just barely lived through?From Scott Cutler: Everybody was watching this week to see if the IPO market could get some legs again. The successful debuts of Bridgepoint Education and Rosetta Stone on NYSE Euronext effectively doubled the number of IPOs we have seen in the market this year and will help to lay a foundation for a stronger market that is really important for our economy.
These two events highlighted the changes in and importance of investors, traders, pricing and the effects of IPOs on the overall economy. Here are my observations on what we learned.
IPO investors are looking for a solid investment thesis built upon three prerequisite characteristics: participation in a growing industry, business execution and market leadership. Sounds simple, but the number of companies meeting all three are rare--so don't expect the floodgates to open all too soon. I do think others will follow in the coming months, and they will be able to thank these two pioneers for helping to lead the way. These transactions were also particularly important in shaping sentiment around the IPO asset class itself. Investors making money on IPOs starts the flywheel, and momentum is able to build on itself.
The management teams and bankers involved in the recent deals told us that the buyside players are changing. Many of the hedge funds and fast money players are gone, heralding a return of the long-term investor. This is important for the newly public company because it gives them the ability to create a better shareholder base aligned with their strategic objectives.
Pricing and valuation are obviously critical to the success of an IPO. Both deals this week seemed to price well relative to their public comps. In the past, this has been a major problem in the industry as management teams, boards, and investors pushed to get the highest valuation and the last dollar out of pricing. It set up an environment where two-thirds of the IPOs missed expectations the first or second quarter after listing. My advice to any company on valuation is to remember two things: First the IPO is not a sale of the company and Second, you are an unproven private company with higher risk--acknowledge that and prove the market wrong. The year-over-year valuation comparisons are getting easier so valuation may prove to be less of an obstacle going forward.
My last point is something we often forget to think about. The IPO is an important job engine for our economy. These two companies employ about 2,000 employees. Bridgepoint didn't exist five years ago. Rosetta Stone had 10mm in revenue five years ago. Both companies create jobs, provide for families and create wealth. We need the IPO market to work in our economy--an economy, if I remember, that was established on entrepreneurship and innovation.
So, kudos to these two for setting the stage. I, for one, feel more positive today than I did last week and who wouldn't want a change in sentiment after the winter we have just barely lived through?
By: scutler
File Under: Listed Companies
From Scott Cutler: Everybody was watching this week to see if the IPO market could get some legs again. The successful debuts of Bridgepoint Education and Rosetta Stone on NYSE Euronext effectively doubled the number of IPOs we have seen in the market this year and will help to lay a foundation for a stronger market that is really important for our economy.
These two events highlighted the changes in and importance of investors, traders, pricing and the effects of IPOs on the overall economy. Here are my observations on what we learned. From Scott Cutler: Everybody was watching this week to see if the IPO market could get some legs again. The successful debuts of Bridgepoint Education and Rosetta Stone on NYSE Euronext effectively doubled the number of IPOs we have seen in the market this year and will help to lay a foundation for a stronger market that is really important for our economy.
These two events highlighted the changes in and importance of investors, traders, pricing and the effects of IPOs on the overall economy. Here are my observations on what we learned.
IPO investors are looking for a solid investment thesis built upon three prerequisite characteristics: participation in a growing industry, business execution and market leadership. Sounds simple, but the number of companies meeting all three are rare--so don't expect the floodgates to open all too soon. I do think others will follow in the coming months, and they will be able to thank these two pioneers for helping to lead the way. These transactions were also particularly important in shaping sentiment around the IPO asset class itself. Investors making money on IPOs starts the flywheel, and momentum is able to build on itself.
The management teams and bankers involved in the recent deals told us that the buyside players are changing. Many of the hedge funds and fast money players are gone, heralding a return of the long-term investor. This is important for the newly public company because it gives them the ability to create a better shareholder base aligned with their strategic objectives.
Pricing and valuation are obviously critical to the success of an IPO. Both deals this week seemed to price well relative to their public comps. In the past, this has been a major problem in the industry as management teams, boards, and investors pushed to get the highest valuation and the last dollar out of pricing. It set up an environment where two-thirds of the IPOs missed expectations the first or second quarter after listing. My advice to any company on valuation is to remember two things: First the IPO is not a sale of the company and Second, you are an unproven private company with higher risk--acknowledge that and prove the market wrong. The year-over-year valuation comparisons are getting easier so valuation may prove to be less of an obstacle going forward.
My last point is something we often forget to think about. The IPO is an important job engine for our economy. These two companies employ about 2,000 employees. Bridgepoint didn't exist five years ago. Rosetta Stone had 10mm in revenue five years ago. Both companies create jobs, provide for families and create wealth. We need the IPO market to work in our economy--an economy, if I remember, that was established on entrepreneurship and innovation.
So, kudos to these two for setting the stage. I, for one, feel more positive today than I did last week and who wouldn't want a change in sentiment after the winter we have just barely lived through?From Scott Cutler: Everybody was watching this week to see if the IPO market could get some legs again. The successful debuts of Bridgepoint Education and Rosetta Stone on NYSE Euronext effectively doubled the number of IPOs we have seen in the market this year and will help to lay a foundation for a stronger market that is really important for our economy.
These two events highlighted the changes in and importance of investors, traders, pricing and the effects of IPOs on the overall economy. Here are my observations on what we learned.
IPO investors are looking for a solid investment thesis built upon three prerequisite characteristics: participation in a growing industry, business execution and market leadership. Sounds simple, but the number of companies meeting all three are rare--so don't expect the floodgates to open all too soon. I do think others will follow in the coming months, and they will be able to thank these two pioneers for helping to lead the way. These transactions were also particularly important in shaping sentiment around the IPO asset class itself. Investors making money on IPOs starts the flywheel, and momentum is able to build on itself.
The management teams and bankers involved in the recent deals told us that the buyside players are changing. Many of the hedge funds and fast money players are gone, heralding a return of the long-term investor. This is important for the newly public company because it gives them the ability to create a better shareholder base aligned with their strategic objectives.
Pricing and valuation are obviously critical to the success of an IPO. Both deals this week seemed to price well relative to their public comps. In the past, this has been a major problem in the industry as management teams, boards, and investors pushed to get the highest valuation and the last dollar out of pricing. It set up an environment where two-thirds of the IPOs missed expectations the first or second quarter after listing. My advice to any company on valuation is to remember two things: First the IPO is not a sale of the company and Second, you are an unproven private company with higher risk--acknowledge that and prove the market wrong. The year-over-year valuation comparisons are getting easier so valuation may prove to be less of an obstacle going forward.
My last point is something we often forget to think about. The IPO is an important job engine for our economy. These two companies employ about 2,000 employees. Bridgepoint didn't exist five years ago. Rosetta Stone had 10mm in revenue five years ago. Both companies create jobs, provide for families and create wealth. We need the IPO market to work in our economy--an economy, if I remember, that was established on entrepreneurship and innovation.
So, kudos to these two for setting the stage. I, for one, feel more positive today than I did last week and who wouldn't want a change in sentiment after the winter we have just barely lived through?
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