It was only a few years ago that the venerable Big Board seemed to be showing its age. Where did the brash young high-tech companies go to float new offerings? NASDAQ. Where did the action increasingly seem to be, as more and more small companies rose in importance, and the volume of trading in their shares grew and grew? NASDAQ. Slowly but surely, though, the New York Stock Exchange has reinvented itself. Clubbiness is out--witness the elevation two years ago of Queens (N.Y.)-born Richard A. Grasso, a 30-year NYSE employee, to the chairmanship of the NYSE. The old hidebound mentality is out, too. Grasso has embraced technology programs that his predecessors launched and made a concerted effort to raise the exchange's global profile. Today, a seat on the exchange goes for a cool $1.35 million, and the NYSE is drawing big high-tech names such as America Online Inc.
There's no doubt that the NYSE has profited of late from NASDAQ's woes; in 1996, the Securities & Exchange Commission accused market makers of colluding to set prices, and the National Association of Securities Dealers, NASDAQ's parent, was required to shore up regulatory operations. But NASDAQ is marketing itself aggressively these days to defend its turf. The battle has been joined between the NYSE, home of the highly automated specialist-trading system, and NASDAQ, home of the computerized market-maker system.
The NYSE has generally higher listing fees but can boast a strong brand identity, wide global reach, and a vigorous regulatory effort. Spreads are narrowing on both the NYSE and NASDAQ, so neither may be able to claim an advantage there. But multiple market makers on NASDAQ offer companies greater liquidity, and many giants that got their start on NASDAQ, such as Microsoft Corp., are loyal. Meanwhile, making waves on the sidelines are computerized alternative trading systems, which are handling more transactions for powerful institutional traders. Add it all up, and the world of investing is more competitive than ever. For companies raising capital, as well as for investors, that can only be good.