Nasdaq Denies Approaching NYSE About a Possible Merger
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The Nasdaq Stock Market denied a report Tuesday that its chief executive had approached the New York Stock Exchange about a merger.
“The unverified story based on rumors and speculation regarding a Nasdaq and NYSE merger, as reported in the Dec. 23 edition of the Wall Street Journal, is incorrect and has no basis in fact,” Nasdaq spokeswoman Silvia Davi said in an e-mailed statement.
The Journal reported that Nasdaq CEO Robert Greifeld had approached the NYSE three weeks ago and that the process was at a very early stage. Greifeld, however, said there was “nothing behind the report.” The Journal subsequently said it stood by its article.
Although a merger with the NYSE could beef up Nasdaq’s trading and listing fees, which have been falling because of electronic trading competitors and bankruptcies, delistings and transfers to other exchanges, traders were skeptical that the Big Board’s floor-based auction market, run by specialists, could be combined with the trading model at Nasdaq, where shares are traded electronically.
“It doesn’t make much sense to me,” said Kenneth Pasternak, a former Nasdaq board member who runs hedge fund Chestnut Ridge Capital. “I don’t think you could ever reconcile them structurally, and why would New York want to erode the specialists’ franchise?”
NYSE spokesman Richard Adamonis said the exchange wouldn’t comment on “speculation” about a merger. Interim NYSE Chairman John S. Reed wasn’t available for comment, Adamonis said. Reed said in an interview last week that he planned to spend this week sailing through the Panama Canal with family members.
“We stand by the article as published,” said Robert Christie, a spokesman for Dow Jones & Co., which publishes the Journal. “It was based on information from people in a position to know.”
The NYSE’s incoming chief executive, John A. Thain, said last week that electronic trading might expand at the exchange, where the trading floor is dominated by the specialists who oversee the buying and selling of shares in the 2,600 stocks listed on the NYSE.
Thain also said specialists would continue to help smooth stock price fluctuations and act as market makers of last resort when buy and sell orders are unbalanced.
Some Wall Street firms think they could save costs by combining marketplaces.
“This is something that’s been on and off for ages,” said Richard Grossman, a director of Redmayne Bentley Stockbrokers in London. “There is some logic there. If you brought everything under one roof with one computer and one settlement system you could save some money.”
In an interview with CNBC, Greifeld said he had his first conversation with Reed a week and a half ago and that the talk focused on market structure in general. “It was on a different matter,” he said.
Nasdaq, the biggest marketplace by number of companies listed, reported a $38-million third-quarter loss last month that reflected a 27% drop in revenue and costs incurred to close some businesses.
The NYSE, the world’s biggest equity exchange, is trying to regain the confidence of investors after the ouster of Chairman Richard Grasso in September.
The NYSE and the Securities and Exchange Commission also are probing whether specialist firms, who match buy and sell orders, handled trades improperly. Thain will take up the CEO post at the NYSE next month.
Nasdaq has been expanding efforts to lure NYSE-listed companies, hoping to capitalize on turmoil in the wake of Grasso’s departure.
As of last month, only one NYSE company had left the exchange for Nasdaq in the last four years. The Big Board lured 42 companies from Nasdaq last year alone.
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