Sprecher said the reliability of the New York Stock Exchange, where humans stand on the trading floor, is one of the reasons his Atlanta-based company is buying the parent. Trading in the $20 trillion U.S. equity market is spread across 13 public exchanges and 44 actively operated alternative trading systems, according to a U.S. Securities and Exchange Commission research paper this month. Almost all of them are electronic.
“Markets need a human touch,” the chief executive officer of ICE said today at an event in Atlanta held by the Atlanta Press Club. “When there’s a problem in the market, business goes back to the floor. What we’re buying in the New York Stock Exchange is the place where everyone goes in times of trouble or times when the market is wanting real certainty,” he added. “That’s the one you want to own.”
Sprecher said NYSE also has a competitive advantage, which it shares with Nasdaq OMX Group Inc., of conducting opening and closing auctions used by some of the world’s biggest money managers.
ICE agreed to purchase New York-based NYSE Euronext in December, forming one of the world’s largest exchange owners by the market value of its stock. ICE, a specialist in energy trading, will expand through the deal into interest-rate swaps and U.S. stocks. ICE expects to complete it on Nov. 4, pending further regulatory approvals, Sprecher said today.
Shares of ICE fell 0.5 percent to $197.25 today. They have advanced 59 percent in 2013, the fifth-biggest advance in the 27-company Bloomberg World Exchanges Index. NYSE Euronext (NYX) has risen 42 percent this year. Their market values are $14.4 billion and $10.9 billion, respectively.
NYSE’s business was “adrift” when ICE agreed to buy it, though the New York Stock Exchange building in lower Manhattan remains an iconic symbol of American capitalism, Sprecher said.
“The NYSE building and what happens in that building is critically important,” he said. Although the number of traders working there has dwindled over the years, Sprecher said more people could end up working there.
He said changes are forthcoming at NYSE, but he declined to describe them because the transaction hasn’t closed yet.
“It’s sort of like buying someone’s house,” he said. “I don’t really feel comfortable talking about how I’m going to redecorate. There’s something kind of unseemly about that. You don’t want to actually talk about their drapes. You actually want to own the house and then let them move to Kansas, and then you can go in.”
One of Sprecher’s deputies said this month that rules governing U.S. equities trading should be pared back because regulations have made the market vulnerable to breakdowns.
To improve the U.S. stock market, “I would probably start by getting rid of rules -- and some pretty big rules,” Tom Farley, the senior vice president of financial markets at ICE, 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 two weeks ago.
Human market makers have been squeezed out of U.S. stocks by declining profitability. To spur trading, exchanges use a pricing model known as maker-taker to coax computerized trading firms to facilitate transactions.
“I don’t like maker-taker,” Sprecher said. “You shouldn’t pay people to trade,” he added. Market makers “need to be able to earn a living.” He didn’t elaborate on alternatives.
Sprecher said his wife, Kelly Loeffler, hasn’t made a decision on whether to run for U.S. Senate. Loeffler is the vice president for investor relations and corporate communications at ICE, and also co-owns the Atlanta Dream, which plays in the Women’s National Basketball Association.
Bob Barr, the former U.S. Representative from Georgia and Libertarian Party candidate for president, was among attendees at today’s event in Atlanta.
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