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NYSE Euronext, the biggest U.S. stock exchange owner, is willing to consider major changes to how it does business as part of a discussion on reworking the structure of American markets, according to Chief Executive Officer Duncan Niederauer.
NYSE would review issues such as its status as a self-regulator of customers and its practice of giving rebates to high-volume users of its markets as part of industrywide talks, Niederauer said. He didn’t say what concessions he expected from other market participants beyond a willingness to compromise.
“A lot of people want to make it like it’s a fist fight or a food fight,” Niederauer said today during a speech at an Investment Company Institute conference in New York. “It doesn’t have to be.”
Niederauer spoke as his company’s acquisition by IntercontinentalExchange Inc. nears a projected Nov. 4 completion date and amid pressure from U.S. Securities and Exchange Commission Chairman Mary Jo White to prevent the technology breakdowns that are plaguing American markets. Niederauer was among bourse executives who met with White on Sept. 12, months after NYSE officials went to Washington to discuss restrictions on private trading venues including dark pools that compete with the New York Stock Exchange.
Non-public venues, which are run by many of the same broker-dealers that NYSE oversees as a self-regulatory organization, or SRO, now handle almost 40% of U.S. stock trading, according to data compiled by Bloomberg. NYSE Euronext remains the single largest operator, with about one-fifth of the nation’s volume handled on its three markets.
Making Consessions
Niederauer said today that the industry should consider a trade-at rule, a regulation that would keep trades away from off-exchange venues unless those markets improve upon prices available on public markets. At the same time, the nation’s exchange operators could consider giving up the maker-taker model that pays firms that provide liquidity.
“What we’re committing to do is to show up and say, ‘If everybody wants to, put everything from SRO status to market data to the trade-at rule to access fees to maker-taker on the table, and let’s have an honest, open discussion about it,’” Niederauer said.
Industry talks would probably yield results, though all sides must be willing to negotiate, Niederauer said today.
Nothing Sacred
“If we sit down, we’re going to find we have a lot more in common than we think we do,” he said. “There’s a lot more common ground, and I think people would be surprised that things people think we hold sacred, if for the greater good we have to put something on the table, everyone has to give to get.”
Earlier this week, a senior executive at NYSE Euronext’s future owner, ICE, said rules governing U.S. equities trading should be pared back because regulations have made the market vulnerable to malfunctions.
Tom Farley, the senior vice president of financial markets at ICE, said that regulations introduced since the late 1990s have forced “unnatural competition and evolution” between public exchanges and among equity venues run by broker-dealers.
To improve the U.S. stock market, “I would probably start by getting rid of rules -- and some pretty big rules,” Farley said Oct. 8 at a Baruch College conference in New York. He declined to identify those he would prefer to eliminate. “There’s been several significant rules that have been layered on in the last 15 years that have resulted in a costly and complex market,” he said.
