The long, slow demise of the NYSE
People have been talking about the demise of the New York Stock Exchange for more than 30 years.
Back in the 1970s, it was thought that newly empowered institutional investors would spell the demise of "the club." Then came the long, slow rise of electronic trading that slowly but surely eroded the Big Board's market share--and doomed the NYSE floor. Now, all those predictions have basically come true.
This leads me to an interesting essay by the former CFO of the NYSE, Amy Butte.
She writes that, "The NYSE turned out to be much smaller, less profitable and more vulnerable to competitors than its brand suggested. While the NYSE controlled more than 90 percent of the U.S. cash- equities market, its market share -- when accounting for futures, options and other assets traded on global exchanges -- was less than 5 percent. As market structure changed, and became more electronic, so did the economics of the business. Transaction revenue was dwindling, and listing fees were under scrutiny. New sources of income needed to be found. We looked to higher growth, wider- margin businesses in Europe, clearing and derivatives as the Holy Grail."
In the end, the NYSE was thoroughly whipped by the realities of modern trading. Strategically, it sought to always be an acquirer of others, to stay ahead and on top. It lacked the currency for that, and the Atlanta-based ICE will soon own it.
For folks who have been observing the Wall Street scene for a long time, it's still hard to believe.
- here's the article
NYSE Euronext to be bought by ICE