New front in 'listings war'; condemning regulators; putting financial writers on the couch

By: Ray Pellecchia

File Under: Miscellaneous, NYSE Arca

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You've probably seen at least a hundred articles on the competition among markets for new listings, but I think this is the first I've seen about a new front in the war. Institutional Investor reports on the Listings War 2.0 (excerpt):

ON JULY 17, DATA STORAGE PROVIDER Netezza did something no technology company had ever done. Instead of going public on the Nasdaq Stock Market -- the preferred destination for tech IPOs for decades -- the Framingham, Massachusetts, vendor steered its $124 million initial offering to NYSE Arca -- a rival platform NYSE Euronext has been promoting as a venue for issuers that don't meet the standards for listing on its marquee market, the New York Stock Exchange. ...

CFO Patrick Scannell says he thinks NYSE is a better brand than Nasdaq with which to align his company. "A potential client is not going to make a decision to work with us because we're listed with NYSE rather than Nasdaq, but it's just one more part of the overall package they look at," he explains.

Among the other factors that influenced Netezza's decision: Arca's market structure, which assigns each listed company to a lead market maker -- in Netezza's case, Susquehanna International Group -- that must quote the best bid and offer in the company's shares at least 15 percent of the time. That requirement is meant to ensure an orderly market. Nasdaq employs a multiple market-maker system in which each dealer is required only to post both buy and sell quotes in each stock but not to keep markets moving when other buyers and sellers aren't present. Netezza sold 10.4 million shares at $12 apiece; in late August the stock was trading at about $14. ...

Following Netezza's move, several other technology companies have shown an interest in NYSE Arca. On August 13 another data storage provider, Eden Prairie, Minnesota-­based Compellent Technologies indicated in an amended IPO prospectus that it will list on NYSE's Arca instead of on Nasdaq, as it had originally planned. Neither exchange has a business relationship with the company, says a Compellent spokesman. And Scannell says that since the deal, he has received calls from executives at about a half dozen tech companies that are considering initial offerings and are curious about NYSE Arca (he declines to name them).

It's just a start, but it's a good start.

The Financial Times had an interesting piece yesterday, Transatlantic regulatory harmony is in the air (excerpt):

... While London and New York have since then more often than not competed with each other as financial centres to attract international business, this year that may be changing. The two have begun a dialogue to help the world's largest financial groups do business more efficiently in both places. For the first time, regulators and the private sector are moving in tandem to reduce barriers to cross-border finance.

The fact that the cities were able to put aside their rivalry shows how hand-wringing in the US about the competitiveness of its capital markets - while still a hot topic - is prompting action on something much bigger: a need to reduce regulatory barriers to improve transatlantic financial markets. ...

Citigroup, which operates globally, chafes at having to deal with more than 40 regulators where it does business. Edward Greene, general counsel for markets and banking, says that while the capital markets of the US and Europe are the most developed, they are also the most regulated, with "a multitude of conflicts between securities regulations that artificially separate those two markets".

He adds: "The challenge is not so much US competitiveness versus somewhere else but rather: why can't we blend and make seamless the two most powerful markets?" ...

For years, officials paid lip-service to the idea of closer regulatory co-operation. But it took the creation of NYSE-Euronext, the world's first transatlantic stock and derivatives exchange - followed by the purchase by Frankfurt's Deutsche Börse of the International Securities Exchange, a US options platform - to jolt regulators into action. ...

The article quotes EU Internal Markets Commissioner Charlie McCreevy saying that regulators are now "condemned to cooperate." My read of this is that regulators want to cooperate. They know that duplicative regulation is not effective regulation. They know that harmonizing regulation across borders will enable them to better focus on assessing risk, developing meaningful rules, encouraging compliance and applying surveillance and enforcement. Harmonization is a huge task, no denying that, but in the end, regulators are recognizing that globalization of markets is giving them a new opportunity to adapt regulation into something more effective for this new world.

When The Words Of Financial Writers Are Indistinguishable From Those of Psychiatric Patients (TraderFeed blog) -- Hey, that's Dr. Brett Steenbarger's headline, not mine! Behind the catchy hed is a provocative piece about analyzing the work of online financial writers and bloggers (excerpt):

... Much of what I'm reading is identical to the speech of psychiatric patients. I don't mean this hyperbolically at all. I mean it in a very literal sense. If these writers spoke the words to me that they are writing, I would conclude that they're both emotionally conflicted and constricted.

Allow me to illustrate what I mean:

A man comes into my office, having just lost tens of thousands of dollars in trading. From his facial features, he is clearly upset; it's money his family can't afford to lose. He says to me:

"The market moved away from its average and that made the sellers jump in. It was a large loss and now it's just a matter of looking to the future. Things like this happen. You just have to figure it out. The economy can't be all that bad. Stocks have to come back. Just look at interest rates. That has to give things a boost."

What would I conclude from this speech sample? I would see that our patient is upset, but I would also note that he doesn't own any of it. Indeed, he barely speaks about himself. He doesn't talk about what happened in any detail, and he certainly avoids any kind of talk about his feelings.

In other words, he's conflicted (upset about his loss) and he's constricted (not able to talk about his experience). That's a common combination among psychiatric patients. The role of the shrink is to see behind the words to the experience underneath. That's where the real information lies.

Suppose we treat the writings of financial pundits the way we would treat the language samples of patients in therapy. Fortunately, there is software available to accomplish this for us...

That's all the business I have for now. On to the trivia. Celebrating birthdays On This Day: Don Cornelius, Mr. "Soul Train," 71; Randy Bachman, 64; Meat Loaf, 60; Stephan Jenkins (Third Eye Blind), 42; Brad Arnold, 28 (3 Doors Down); and Avril Lavigne, 23.

Tags: NYSE Arca, Nasdaq, regulation