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February 1, 2013

ICE Buy of Big Board Not Chilling

By John D'Antona Jr.

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  • ICE Buy of Big Board Not Chilling
  • Page 2


That's the reaction of U.S. equity traders and analysts to the acquisition of NYSE Euronext by the IntercontinentalExchange, the Atlanta-based operator of regulated futures exchanges, global OTC markets and clearinghouses in North America and Europe.

Initially, traders were concerned about early rumors that ICE might end open-outcry trading for equities in New York, as it had in its commodities pits in Lower Manhattan just three months ago. But the Southern exchange said it had no such plans.

Jeffrey Sprecher, ICE

The operator comforted the floor brokers-and others who cherish the exchange that traces its roots to a buttonwood tree in 1792-in an interview after ICE announced it was going to acquire NYSE Euronext for $8.2 billion on Dec. 20.

"Absolutely [there will be floor brokers], because what these people did here is, they prevented flash crashes, they are here at times of emergency," said ICE chairman Jeffrey Sprecher. "In times of stress, this economy turns to the New York Stock Exchange and to the people that are here."

While technology plays an active part in the equities trading markets, the floor will continue operations as it has, Sprecher said.

He also remarked on how some high-frequency trading practices, such as excessive messaging, need to be addressed, and how the issue of maker-taker pricing deserves scrutiny.

"It is clear that there is going to be change," he said, referring to U.S. equity market structure during a recent analyst conference call discussing the NYSE deal. "It is clear that the leadership to drive that change ... is going to come from the New York Stock Exchange."

But one analyst begs to differ. Sang Lee, managing partner at Aite Group LLC in Boston, said life for equity traders won't change much, if at all.

While Sprecher will get more of a forum for his views, given the weight the Big Board carries, Lee said issues such as market fragmentation, high-frequency trading practices and low trading volumes will persist. In some cases, such as that of excessive message traffic, actions are already being taken to address the issue.

"This acquisition doesn't really change much on the U.S. equities side," Lee said. On the European side there could be some implications, he said, as ICE has mentioned it was interested in divesting NYSE's equities business there. But no action will be taken until after the merger is complete, if at all.

"I think the main reason for this deal is so ICE can get more on the derivatives side of the balance sheet," Lee said. "When they tried to buy the NYSE with Nasdaq, it was about derivatives as well. Nasdaq was going to get the equities portion of the business. This shows to me where ICE's interests lie."