One on One with NYSE Euronext CEO Duncan Niederauer
Tuesday, January 06, 2009
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SUSIE GHARIB: Despite that gloomy outlook from the Fed today, the head of the New York Stock Exchange told me he's optimistic about the stock market in 2009. Earlier today, here at the NYSE, I sat down with CEO Duncan Niederauer and asked for his market forecast.
DUNCAN NIEDERAUER, CEO, NYSE EURONEXT: I think '08 was the year we'd all like to put behind us and we will. I also think we're going to have a new president coming in who I think is going to bring a lot of hope and optimism to the equation. I think the other thing the markets got going for it is the equity market is always a leading indicator of an economic recovery. So I'm cautiously optimistic that we're going to see a nice recovery in the equity market in the first or second quarter which is going to foretell an improvement in the economy later in 2009. So that's my prediction. I'm going to stay away from a specific number if that's OK.
GHARIB: Duncan, as you know, many investors were really shaken by the stock sell-off in 2008. They lost a lot of money. Many of them say I'll never invest in stocks again. How does this shift affect the NYSE?
NIEDERAUER: You're right. We've had an equity investing culture in this country for 30 or 40 years now that has really been brought into question for the first time in as far back as any of us can remember. So I think if the individual investor doesn't come back to the marketplace, I think that's going to require then a reinvention of all the financial services, not the least of which affected will be a company like ours.
GHARIB: I know you talk to the CEOs of companies that trade here. What are their expectations for recovery and growth?
NIEDERAUER: The average CEO is still quite pessimistic, I'm sad to report. A few of them are seeing some light at the end of the tunnel. But the majority of them are still quite pessimistic, very eager to hear what Mr. Obama is going to do and what impact he can have in the short run. But still pretty pessimistic Susie, I'm afraid.
GHARIB: So what is that telling you about how stocks will perform, how the economy is going to perform?
NIEDERAUER: One of the most bullish indicators I think you can find is the inverse of the sentiment of public company CEOs like myself. When we're all pessimistic, I think investors should actually be confident.
GHARIB: We've seen some high-profile companies leave the big board and go over to the NASDAQ like News Corp. Is that a reflection that the NYSE is losing some of its prestige?
NIEDERAUER: I don't think so. I think there's always been history of companies moving in both directions. I think it's actually good for issuing companies because it means there's competition for listings. We view ourselves as a very, very strong investor and issuer advocate. We're going to keep ramping up the level of services we provide to our issuers, but it's a reminder that we shouldn't take our position for granted. We've got to earn their business everyday just like any other company does.
GHARIB: We've also seen a lot of de-listings at the NYSE because companies haven't been able to meet their capital requirements. Now the NASDAQ has suspended some of its requirements. Are you considering to do the same thing?
NIEDERAUER: We are more reluctant than they probably are to suspend those requirements. I think if you're going to be the gold standard for listings globally, you have to make decisions like that very, very thoughtfully. I think we try to be as flexible as we can because we realize there's a lot of good companies here that may temporarily be falling below certain standards. So we're willing to give them more time to recover as the overall market recovers, but beyond that, I don't think you'll see us make a lot of significant changes to the standards. I think it's a dangerous precedent to send.
GHARIB: Duncan, with so many hedge funds going out of business and bankruptcies on the rise, that's got to hurt your trading volume. How is the NYSE adapting to this loss of business?
NIEDERAUER: There's no question that leverage has come out of the system. Hedge funds are going to trade less. I just don't think as many hedge funds are going out of business as everybody thinks they are, but I think they're clearly going to be deploying less leverage. So are the big investment banks and banks. So I think you'll see lower volumes generally but exchanges, you know, are -- have to expect that you've got some years where volume goes up. You've got other years where volume goes down and it's just about managing your fixed costs.
GHARIB: What about new reforms and regulations with Mary Schapiro nominated to be the head of the SEC? What changes are you expecting from her?
NIEDERAUER: I think Mary Schapiro and Gary Gensler for the SEC and CFTC are the right kind of people at the right time. So I think they're going to do terrific. In terms of what new regulation is coming, I don't think it's about more regulation. I think it's about applying regulation that already exists and already has been proven to work to a new suite of products. I hope we don't spend the next year or two creating whole new reams of regulation. I don't think that's what we need right now.
GHARIB: What about NYSE stock, down more than 60 percent last year. Is its performance this year going to be dependent on how the overall market does or is there something else you can influence?
NIEDERAUER: I have a feeling a lot of it is out of our control. Look at the year we just had this year. We weren't going to be up even though our performance was better year on and on and yearly, the market was down 40 percent. So I'm cautiously optimistic that if we keep doing the right things and we keep executing we're very well positioned and I would expect '09 and '010 to be good years for our stock.
GHARIB: Duncan, thank you so much for your time. It's great seeing you.
NIEDERAUER: Nice to see you again, Susie and congratulations on NBR's 30th anniversary. I look forward to ringing the bell with you in a couple of weeks here.
