NYSE Says Alibaba to Get All the Time It Needs at Opening

The clock won’t be ticking on Alibaba Group Holding Ltd. as market makers work to arrange its first trade on the New York Stock Exchange.

“Whether it’s 15 minutes to get to that solution or an hour and 15 minutes, we don’t really care,” David Ethridge, the senior vice president at NYSE Group Inc. who heads its initial public offering unit, said in an interview. “We’re going to be very supportive to the underwriting teams, the designated market maker and all the other market participants in making sure we give them the kind of launch they want.”

The Chinese e-commerce company will probably break the record for the world’s biggest IPO. NYSE’s computers have been tested and the exchange is ready to list Alibaba, Ethridge said. The market owned by Intercontinental Exchange Inc. is confident its auction system can handle any level of demand after Twitter Inc.’s debut in November went off without a major hitch -- a contrast to Nasdaq OMX Group Inc.’s mishandling of Facebook Inc.’s offering in 2012.

“We’ve got a lot of experience on the floor, and a lot of collective effort on the Street” to prepare for the start of Alibaba on Sept. 19, Ethridge said. The exchange is unfazed that Alibaba is coming to market on a day known as quadruple witching that often sees extra volume and volatility due to the expiration of options and futures, he said.

Twitter was the largest technology offering since Facebook’s in May 2012, an IPO that was marred by malfunctioning software at its listing exchange, Nasdaq. NYSE avoided a reprise with Twitter, easing anxiety among traders.

Exchange Auction

When a company goes public, its bankers must first sell shares to an initial group of investors. Once the stock has been distributed, the listing exchange holds an auction to establish the first public price. At NYSE, the process is managed by human traders in the exchange’s Manhattan headquarters. For Nasdaq, the other corporate listing exchange in the U.S., the auction is run by software.

NYSE pitches this human touch as a key competitive advantage to help ensure automated systems don’t spiral out of control. Nasdaq says its computers have repeatedly proven themselves reliable in the years following Facebook.

“We have to stand by our record in terms of the 200-something IPOs we’ve done since that date that have done very well in terms of our technology,” Nasdaq Chief Executive Officer Robert Greifeld said in a Bloomberg Television interview on Sept. 11.

SEC Penalty

Nasdaq paid a $10 million penalty to the U.S. Securities and Exchange Commission for its role in mishandling Facebook’s IPO. The share sale suffered a delay to the start of trading and errors that caused some investors to buy more shares than they wanted.

Alibaba wants to raise $21.8 billion. It’s seeking a valuation as high as $167.6 billion, more than 95 percent of companies in the Standard & Poor’s 500 Index, the benchmark gauge for U.S. stock prices.

Alibaba’s debut will be the biggest for a technology company since Twitter began trading on Nov. 7. As with that opening, Alibaba’s primary market maker -- Barclays Plc, according to a person with direct knowledge of the matter -- will run an auction after the official open of U.S. trading at 9:30 a.m. New York time. Once the firm settles on a price, the stock will open for normal trading.

Taking Time

Popular IPOs can take time before their auctions are complete. Twitter’s stock began trading 79 minutes after the exchange opened, giving it one of the longest auctions in the last decade. By comparison, LinkedIn Corp.’s first trade was at about 10 a.m. on May 19, 2011, while Yelp Inc. needed about 15 minutes in March 2012, according to data compiled by Bloomberg.

To prepare for Alibaba, NYSE held two tests, one in July and one on Sept. 6, to allow brokers to check their and the exchange’s systems.

“We gave all the participants the opportunity to test us in a robust way,” Ethridge said.

The first day of trading coincides with the quarterly quadruple witching when futures and options contracts on indexes and individual stocks expire. On the last such day, in June, NYSE saw 1.7 billion shares change hands, 2.7 times yesterday’s volume.

Asked about NYSE’s ability to cope with Alibaba’s debut and quadruple witching, Ethridge pointed to Visa Inc.’s $19.7 billion debut in March 2008 and General Motors Co.’s $18.1 billion offering in November 2010.

“They’ve done Visa on our floor, which was a very large tech transaction, and General Motors was a large transaction. So we’ve got a lot of experience around this,” he said.