One on One with NYSE Euronext CEO Duncan Neiderauer
Wednesday, April 09, 2008
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SUSIE GHARIB: The New York Stock Exchange just marked the one year anniversary of its big merger with France's Euronext, creating the first transatlantic stock exchange. So how's the integration going so far? I asked CEO Duncan Neiderauer, who succeeded John Thain as the big board's boss four months ago.
DUNCAN NIEDERAUER, CEO, NYSE EURONEXT: We're about I'd say a little further along than we thought we would be in some areas and not as far along as we thought we'd be in other areas. We're learning as we go. I said when I took John's place, I thought that as we looked forward, I thought it was more important to focus on integration rather than maybe worrying about the next deal, because these are always more work than you think they are.
GHARIB: Duncan, how do you plan to deal with the intense competition, not only from the NASDAQ but so many start-up exchanges in the U.S. and Europe?
NIEDERAUER: We need to get closer to the customers, roll out the functionality they're looking for, try to remind ourselves that even though the liquidity is fragmented, we can still be a very, very meaningful player in some of the markets where before are we going to have market share that we had three or four years ago? No. But there is a lot of other new areas where we can get a lot better.
GHARIB: As you know, the momentum is towards electronic trading. I know this is a touchy subject here at the exchange, but don't you have to accelerate that move into electronic trading just to stay competitive?
NIEDERAUER: We have embraced technology here. I think people think because we still have a floor we're somehow resistant to the changes. We know that's where the market is going. We just don't think all electronic all the time is the right answer. And we think the markets over the past few months have proven that, that if you're all electronic all the time and there's no opportunity for price discovery, all that does is maximize volatility at the time when you least want that volatility.
GHARIB: Duncan, NYSE Euronext stock is down something like 30 percent since you took over as CEO four months ago. What is it going to take to get it to move higher?
NIEDERAUER: I think what we need to do is put up two or three quarters of good results while you're having all this volatility in financial services and you're seeing a lot of those stocks trade down quite a bit. If we put up two or three good quarters in a row to show that we're not attached to those securities, we shouldn't be correlated to those securities. That's step one. Step two is in addition to performing, reminding everybody that the business model really is quite different. It's a very different business model. We don't have the leverage that those companies have. It's a much cleaner balance sheet. We may not have the opportunity to make the kind of money they make in the good times, but we're a much safer bet in more volatile times, as well.
GHARIB: We have been seeing so much volatility, how is that impacting your earnings?
NIEDERAUER: Quite favorably because remember, volatility usually leads to higher volumes. Some would argue that's not sustainable because if there is a protracted bear market in the U.S., they look back at the other bear markets in history and say, look what happens to volume in a protracted bear market. It goes down precipitously. What's very different about today is the demographics of order flow have changed a lot. A lot of today's market participants were not around five, 10, 15 years ago when they're looking at the previous downturns. They are huge providers of volume on a daily basis, who I don't think really care whether it's a bull market or a bear market because they're short-term investors.
GHARIB: Looking at the regulatory reform plan proposed by Treasury Secretary Paulson, how would, if that reform were to go through, how would that impact the NYSE?
NIEDERAUER: Our view is almost any change that would happen there to make it more fluid would be good for us because we're the only exchange in this country with a 75-year-old rule book. It's harder for us to be nimble because we live under a set of guidelines that were outlined many, many years ago and each time we want to be flexible or change something, we've got to go back to the rule book and work closely with the SEC and try to figure out how to do that. That's hard to do. So I think any change for us would be viewed as a positive and our ability to compete would be enhanced.
GHARIB: I know you talked to a lot of CEOs and market leaders. Do you get the sense that the worst of this financial crisis is over?
NIEDERAUER: The general sense is one of cautious optimism. I think CEOs outside of the financial services industry still feel quite good. Whether that's unfounded optimism remains to be seen, but remember, what's really changed in this country in the last 10 or 20 years and I hear it every day from the CEOs who walk through the door here, is many of their businesses are much more global. Their customer bases are much more global. So they're not completely immunized against the U.S. recession, if we are in fact in one, but they're much less exposed to a U.S. recession than they would have been 10 or 20 years ago as their businesses have diversified.
GHARIB: Duncan, thank you for your time, so nice seeing you.
NIEDERAUER: Thank you very much.
