The sale of the NYSE and the death of stocks
An upstart derivatives exchange buys the venerable New York Stock Exchange, confirming, analysts say, that derivatives are hot, and stocks are not
To the general public, it's quite a "shocker," says David Weidner at MarketWatch. IntercontinentalExchange (ICE), an upstart derivatives exchange, based in Atlanta, is buying NYSE Euronext, the company that owns the iconic, 220-year-old New York Stock Exchange, in a deal worth more than $8 billion. To long-time market professionals, however, this merger merely confirms something they've known for quite some time. They've been witnessing the slow death of stocks — as the lord of the marketplace — for years, as new regulations and decimalization of trades once done using rounder fractions "effectively squeezed the margins — and the potential for graft — out of the system." Initial public offerings offered healthy profits, but even those have dried up recently, leaving the NYSE and other exchanges "searching the globe for a merger partner," hoping they could buy their way to growth. But the lucrative futures and options exchanges that seemed like natural buyers of the stock exchanges turned up their noses, asking, "Why would we need them?"
As if that weren't already humiliating enough for the Big Board, says Felix Salmon at Reuters, "stock trading is a complete afterthought in this deal" for ICE. "The real reason that ICE wants the company is Liffe, NYSE Euronext's London-based financial derivatives subsidiary." Derivatives exchanges, you see, are few. They compete only with each other, so they make money hand over fist. "There are lots of stock exchanges," so they compete fiercely with each other, "and none of them make much money."
This deal, once unthinkable, really does underscore "what a dog the stock trading business has become," say Zachary M. Seward and Matt Phillips at Quartz. There's just no denying it. But if all this gloom is driving down the value of stocks in everybody's eyes, maybe equities markets will soon be so undervalued that they'll bounce back.
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Harold Maass is a contributing editor at The Week. He has been writing for The Week since the 2001 debut of the U.S. print edition and served as editor of TheWeek.com when it launched in 2008. Harold started his career as a newspaper reporter in South Florida and Haiti. He has previously worked for a variety of news outlets, including The Miami Herald, ABC News and Fox News, and for several years wrote a daily roundup of financial news for The Week and Yahoo Finance.
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