Does the Twitter initial public offering mark the swan song of the New York Stock Exchange?
The NYSE’s future is now in the hands of the IntercontinentalExchange, or ICE, the Atlanta-based derivatives mart led by Jeffrey Sprecher, which is set to finalize its $10 billion blockbuster acquisition of NYSE Euronext as early as Monday.
But the once-mighty trading center of America’s blue-chip companies faces unprecedented competition and is steadily losing market share.
The NYSE, which traces its roots back to the Buttonwood Agreement signed on May 17, 1792, is being challenged by the merger of upstart trading rivals BATS and Direct Edge under the BATS moniker, expected to be completed early next year.
Based on the latest available data and current trends, the combined trading firepower of BATS and Direct Edge would throw the NYSE into a new and brutal neck-and-neck race for market supremacy.
The NYSE has already been slapped around. An analysis by Sandler O’Neill & Partners found that the combined BATS and Direct Edge temporarily displaced the NYSE as the No. 1 US stock exchange for volume during a two-day period of trading recently. The normally No. 2 Nasdaq moved into third place.
The powerful BATS and Direct Edge combo could permanently topple the NYSE. In fact, at the end of the third quarter, BATS and Direct Edge had a market share of 9.7 percent and 10.7 percent, respectively, or 20.4 percent combined, compared with the NYSE’s 22.8 percent and Nasdaq’s 18.4 percent.
The race has since tightened. BATS’ and Direct Edge’s pooled market share most recently ratcheted up to 20.6 percent, ahead of Nasdaq’s 19.1 percent, as the NYSE’s declined to 21.7 percent.
The Big Board’s market share has plunged from 40 percent in 2007 — and 80 percent-plus in the NYSE’s glory days.
High-frequency trading and weak volume have already shrunk the NYSE floor-trading community. It’s down from some 3,000 in 2007 to 1,200 today. On an average day, there are 700 traders on the floor. And if you count only stock-trading pros, that drops to about 300.
The NYSE’s future is now in the hands of ICE. The resulting global super exchange resulting from the acquisition would encompass the NYSE’s stock and options marts, one of the planet’s largest derivatives operations, and the NYSE’s lucrative futures mart in London.
There are plans afoot to sell off chunks of NYSE’s European stock-trading business, and some fear even the NYSE itself will soon be next.
ICE denies this. “No, it is not something we are considering,” ICE spokeswoman Brookly McLaughlin told The Post. “We look forward to continuing NYSE’s tradition as a global leader in capital-raising and equities trading.”
Still, there’s already speculation on who potential buyers might be.
“If, indeed, Sprecher were to sell the NYSE, two logical buyers would be the Toronto Stock Exchange and the London Stock Exchange,” NYSE shareholder Thomas Caldwell told The Post. “Sprecher is an entrepreneur; he’s a tough guy. I think he’s changing the thinking within the New York Stock Exchange to being more entrepreneurial — or else die.”
Caldwell, once the largest shareholder in the NYSE Euronext, added, “I mean, you look at the NYSE floor — trading has gone there from physical interaction to electronic trading. There’s a Starbucks, which is as close to sacrilegious as a trader can imagine.”
Meanwhile, Ron Weiner, a regular at the NYSE as a CNBC contributor, dismisses the importance of the NYSE Twitter listing.
“Oh, they love [it]; it is income and something the NYSE can tout,” said Weiner, chief executive of RDM Financial Group in Westport, Conn. “It will be on the new cover of the NYSE’s quarterly report or something — they’ll make marketing hay out of it. But does it matter that much? I don’t think so.”
But don’t write the NYSE’s obituary just yet. It still has skin in the game, says Sandler O’Neill analyst Rich Repetto, noting the legendary exchange’s ability to still lure dozens of plum listings.
Many, like Twitter (whose IPO is slated for Thursday), are from the tech sector.
“Monetarily, one listing is almost immaterial,” Repetto said. “Twitter doesn’t make as much of a difference as the branding and bragging rights that go along with it for the NYSE.”
Net income for NYSE Euronext rose by 38 percent, to $173 million, in the third quarter from a year earlier.
But that was bolstered by its derivative trading operations, as the profitability of equity trading declined on margins, volume — and relentless high-tech competition.