CNBC could lose its primary television set on Wall Street, as the sale of the New York Stock Exchange (NYSE) – including its historic trading floor – is likely to occur in 2015, according to a Sunday New York Post report.
ICE laying the ground work for NYSE sale
The owner of the “big board,” derivatives exchange operator Intercontinental Exchange (ICE), is reported to be laying the ground work for the sale. The NYSE has struggled to maintain its once dominate profitability after “dark pools” were allowed by regulators to trade stocks and compete with the once dominate institution.
Not so fast, says a CNBC report this morning. “We’ve said over and over that its not the case,” a NYSE representative told CNBC in a statement. The Post article did not mention any comment from NYSE or ICE. “While we are working to improve the business, the conclusion in the article that is it for sale is untrue and is (in) conflict with our recent statements about integrating and investing in the NYSE,” ICE said to CNBC. NYSE recently engaged in a plan to lower trading fees to compete for high frequency trading business against lower cost dark pools.
ICE overpaid for NYSE?
When ICE purchased the NYSE, the stock exchange was not the prize. Atlanta-based ICE and its bold CEO, Jeffrey Sprecher, was said to have found value primarily in the NYSE’s derivatives trading platform, Euronext. NYSE Euronext stock and derivatives trading platform was sold for $8.2 billion to ICE in December of 2012. At the time of the sale, many inside the derivatives industry questioned the value of the NYSE and speculated that ICE overpaid. At the time CMEGroup, the dominate player in the derivatives industry, was said to have looked at the deal and passed because the price was too high and they realized that the NYSE’s core business would become increasingly under pressure from dark pools and high frequency trading.
NYSE divested itself from Euronext this past summer, launching a $1.2 billion IPO. With such a low price on the derivatives exchange, exchange observers will be watching the price the NYSE potentially fetches, but the value from the remaining pieces is thought to be much less than $7 billion it would take to recoup the initial investment.
“There is only one move, and that is a sale or spinoff of the NYSE,” Jim Osman, chief executive of the Edge Consulting Group in London, a research firm that specializes in spinoffs and special situations, was quoted as saying in The Post article.
NYSE’s trading floor
After computer-based electronic trading eclipsed human floor trading, the NYSE floor became more of a television set. The exchange floor, about the size of a small concert hall, became a television prop as CNBC moved from a small metal perch tucked away on top of the exchange down to the wooden floor of the historic exchange. It also hosted selected parties after trading hours. This came as the trading floor became mostly a side show to electronic trading that had mostly shifted to the New Jersey suburbs and dark pool trading venues.
Unlike the derivatives industry, where literal monopolies remain and the exchanges operate with relatively little direct product competition in key areas, the apparently less politically powerful NYSE and other stock exchanges saw regulators allow alternative trading venues to compete with the primary stock exchanges. The dark pool trading venues were often backed by large banks and other powerful and sophisticated industry players.
The post NYP Says NYSE Will Be Sold, CNBC Report Says Not So Fast appeared first on ValueWalk.