The NYSE: Farewell to a Legend
We all know how the story started...
In 1792, under a sycamore tree Wall Street was born. In those days everything from potatoes to wheat and paper notes was traded under the sun, rain or snow. It was the sort of capitalism we pretend we have today, but have never actually experienced on our own skins.
Those were the early days of the New York Stock Exchange, before it came to be known as the NYSE.
Today, two centuries have passed and the mightiest giant in the land is going down faster than Elliot Spitzer at a bordello buffett. NYSE owner NYSE Euronext is negotiating its acquisition by Deutsche Boerse AG with an equity valuation of $10 billion. The new company is slated to be the biggest exchange owner, handling equities in excess of $15 trillion and 40% of the U.S. options market.
What This Means For YOU
1) Location, Location, Location...
It is important to understand the historical value and dominance of the NYSE. It was the player in the game for most of its existence...but it's rapid fall from grace is synonymous with everything happening in global business as a whole. The Old Guard is going down. Thinking you have it made because you landed at an FO role at Goldman or that Top Prop Shop downtown means dick these days. With the world looking further and further away from America, you guys should take the hint. A foreign language such as German, Dutch, Portuguese, Mandarin or Russian may add a lot more to your resume than the Bloomberg course or yet another year playing with Excel. If the NYSE can disappear from the stock exchange business... everything is replaceable.
2) HFT and other FAQs
The sale to 18-year-old Deutsche Boerse in Frankfurt shows the increasing importance of machines over humans in trading stocks and the rising influence of derivatives, where profit margins are as high as 55 percent.Can it be spelled out any more clearly? I am reminded almost hourly of the ignorance many enter this world with. Though my previous statement could be meant to describe life, it is squarely focused on Wall Street. It includes those looking to enter, but unfortunately...many who are already there. There are no simple answers. It will continue like this. Volatility will be ever present...in reference to job security.
The solution? If there is one...math and lots of it. There's a reason banks/prop shops are thinking more and more along the lines of: MFE>MSF>MBA
3) Fragmentation
It is really great how it all gets back to simple econ. Deregulation brings more exchanges to market. Competition increases. Execution costs fall. Brokers go bust. The NYSE was able to charge 6.25+ cents a decade ago for a 100 block of trades...now the spread's a penny on the highest volume equities. Economies of scale are a wonderful thing. No matter how much the gurus gag on their own bile, you can never fool the rank and file. Simple logic often outduels the most complex algorithm.
Let's relax for a bit today...
and give a moment of silence to a legend leaving the game...
Will it ever be the same?
So glad I chose to learn German...
The WSJ headline made me laugh: "Germans look to buy Big Board." It's an all-share deal that makes a lot of sense, nothing sinister about it unless you were a specialist at the NYSE in which case you know you'll never get your fiefdom back now. It is pretty crazy to think about nonetheless, I don't think anyone would have seen this type of thing coming 30 years ago.
Dammit and I picked Italian.
Very nice post indeed. Lets see if the trend away from WS continues in the following years.
Just because NYSE is being acquired doesn't mean it can't continue to prosper. Isn't it the only stock exchange worldwide that still employs actual people on the floor?
nobody finds it tremendous that PWP got the sole advisory role for the NYSE? ballin........
Perellas been killin it
Math is important but math people will still be replaced by technology eventually. Relationships are what matter, the only people that can't be replaced on the sell-side are those that sell something (i.e. bankers, research guys, and salespeople & sales-traders).
Exactly what I was thinking. There are plenty of people wasted years of their life developing quant skills that have become obsolete with the increased use of technology and overall efficiency in the market (see LTCM). It's the relationship and idea guys that can't be replaced.
In regards to the original post, I don't see this sale as any sort monumental change. Finance has been constantly evolving for as long as it's been around, and people spend way to much time lamenting about how things "aren't like they used to be." It's the ability to adapt that separates the winners from the losers, and that's the way it has always been.
[quote=Tar Heel Blue]In regards to the original post, I don't see this sale as any sort monumental change./quote] Psychologically and symbolically it's unsettling, personally speaking.
So glad I am developing a HFT black box with 2 Quants.
lmfao the market is not even mildly efficient as regards valuation of securities. at any moment there are tons of mispriced shit. algorithims might be able to work under certain conditions but not when something unexpected comes up or conditions change. you don't need calculus or a mfe/msf to invest. emerging market exchanges are even less efficient. and you don't need to learn another language, soon your phone will be able to translate everything, and they will speak english, anwyay.
Doesn't the purchase give America an even greater ownership stake in the exchange? I was reading WSJ about how we own a majority of NYSE-Euronext as well as 41% of Deutsche Borse.. which if bought, gives us 60% ownership of NYSE_Euronext. Doesn't sound so bad to me.
Way to go Deutsche Börse! XD
I'm so shocked I don't know what to say. I thought Obama was supposed to do good to this country...regulation tied the shit out of it I guess
How, if it were to go through, will this affect M&A/non-S&T people? Private Equity people? Private bankers? :S scared shitless
Take a breath Ahab...it'll be ok
Tar Heel Blue wrote: So, what's the symbology there?
"So either that was a Boondock Saints reference or you don't know the word symbolism"
its a reference. he used the word symbolism right underneath it.
granted its a shares only sale... but does anything change from the top down? zero management turnover?
Management stays the same on the US and European sides, new CEO will be brought in to run the joint company above the current CEOs.
Didn't read the whole thing just keyed on that. Thanks for pointing it out though.
bump
NYSE is a better acronym than DBAG
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