One on One with John Thain, CEO, NYSE
Wednesday, April 04, 2007
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SUSIE GHARIB: Here at the New York Stock Exchange, the big board got even bigger today. The NYSE officially completed its $14 billion merger with France's Euronext, creating the first trans-Atlantic stock change. In Paris this morning, executives from both exchanges celebrated the historic deal. Then his afternoon, they came to all Street where they rang the closing bell at the NYSE and they are celebrating now as you can probably hear in the background. A short while ago, I sat down with John Thain, CEO of the newly created exchange, NYSE Euronext, and asked him what impact this huge merger will have on investors.
JOHN THAIN, CEO, NYSE: If you're a U.S. investor and you want to buy a company that's not listed in the U.S. but is listed in Europe. It will make it easier for you to do that. We'll make it easier for European companies to access U.S. investors. We'll be able to create -- if you want an exposure to a global group of companies, we could create a new exchange traded fund. We could create a new futures contract. So it's rally a combination of making it easier to and have a broader range of products and then, we're going to bring the costs down.
GHARIB: John, some people say that with all the consolidation between exchanges, reduced competition means trading costs will start to go up. Your thoughts on that.
THAIN: There has been a constant downward pressure on trading costs in the United States. There will be greater pressure on trading costs in Europe and there's no question that investors are going to benefit from these consolidations.
GHARIB: I understand a big component of this deal is cost savings and Euronext has no floor traders. How much longer will we be saying the same thing about the New York Stock Exchange?
THAIN: Well, the cost savings come from the technology side and they really come from integrating the trading platforms, integrating the data centers and integrating the networks. And none of that adversely impacts the floor. The fact is our floor adds value. It makes stocks trade in a less-volatile way. It really does offer the ability for investors to get price improvement and we believe that the combination of the brokers and the specialists on our floor is one of the things that makes our market better and more attractive.
GHARIB: You said today that NYSE Euronext will continue to expand globally. As you look around the world, where else do you want link-up?
THAIN: The place where we need a bigger position is in Asia. So in Japan, which of course is the second largest market in the world and of course the yen is an important currency, we have a strategic alliance with the Tokyo Stock Exchange. We bought five percent of the national stock exchange of India, which is another important piece. And the third piece which we're working on but it will probably take a little while is China.
GHARIB: Everyone says that future growth is going to be the options and derivatives markets. How are you going to tackle this very competitive market in the U.S?
THAIN: I think the question for us going forward is do want to continue to grow organically or do we want to do something else to get bigger in the options space. You have to trade off the cost of buying something because typically it costs more to buy something, versus the time it takes to grow organically because it almost always takes longer to grow it organically. And that's something that we're evaluating.
GHARIB: The listings business is also ultra-competitive and the NYSE has been losing companies to the NASDAQ. What can you do to improve the scorecard there?
THAIN: If you look over the last three years, we have had over 60 companies move from NASDAQ to New York and I think we've lost three. So I think the scorecard's quite in our favor. The bigger concern for us is not NASDAQ. It's really companies that choose not to list in the United States at all and who have been going either to London or to Hong Kong. And with our -- with the closing of our deal with NYSE Euronext, we will promote Euronext as an alternative to London in particular. And I think that for companies if they chose not to come into the U.S. market, we will make Euronext the much more attractive listing venue as opposed to London or Hong Kong.
GHARIB: There is some skepticism about the investment potential of NYSE Euronext and the stock was down today. What do you think you have to do to convince Wall Street otherwise?
THAIN: Yes, it was down a little bit today, but it was also up $6 yesterday. The stock tends to be very volatile. I think that the -- you know, what we have to do is prove that we can deliver solid earnings and earnings growth and returns over a longer period of time, and I think there's no question that NYX is going to be an attractive investment.
GHARIB: Thank you so much, John. Good luck to you.
THAIN: Thank you very much, Susie.
