How big has the global sell-off that began last summer been? Simply huge. Record numbers of stocks have traded hands on exchanges in Chicago, London, New York and Frankfurt, according to Bloomberg. But don’t get too long the exchanges yet. Fees are down, and many investors may simply be exiting the market altogether. The news out of Davos isn’t pretty.
“It’s been a good outcome for us in the short term, but we certainly have our concerns,” NASDAQ CEO Robert Greifeld told Bloomberg from Gnomeland. “We recognize that longer term, if we have economic issues, the trading volume will tend to go down. Our clients are all very concerned.”
Replace if with when (or, perhaps even with “now that”) in that quote and you’ll understand why even the exchanges aren’t popping champagne corks over the recent volume spike.
Seized-Up Credit Market Spurs Record Stock Trading [Bloomberg]
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Merrill Lynch Taps Thain
New York Post Reports Announcement Will Come This Afternoon
By John Carney
It looks like it’s Merrill Lynch that is nabbing New York Stock Exchange chief executive John Thain.
The New York Post has just reported that Merrill is expected to announce that it has hired Thain to replace ousted CEO Stan O’Neal sometime this afternoon. Zach Kouwe, whose reporting has scooped the world on this story, attributes it to “people familiar with the matter.”
An NYSE board meeting is scheduled for 2 p.m. today and an announcement could come after the market closes, sources said. The move is a huge coup for Merrill and board member Alberto Cribiore, who has led the search for a new CEO after O’Neal resigned on Oct. 30.
Kouwe also reports that Citi wanted Thain but he chose the smaller, more narrowly focussed Merrill instead. The Post describes this as a “snub” for Citi. NYSE Chief Operating Officer Duncan Niederauer is expected to land the top job at the exchange.
Citi Snub: Thain Going To Merrill [New York Post]
Update 12:32: The Wall Street Journal files its report also: “John Thain, CEO of NYSE Euronext, has agreed to take the top post at brokerage house Merrill Lynch & Co., according to a person familiar with the matter.”
Update 12:39: Congratulations and thanks to all our readers who voted in this morning’s reader poll, which correctly called that John Thain would leave the NYSE for Merrill. We’re constantly gratified by the amazing accuracy of our polls, which have predicted everything from the level of Fed rate cuts to this news. We like to think we have the best informed, most intelligent readers but it’s nice to see you guys prove it over and over again.
Update 12:50: So what happened to Blackrock chief Larry Fink, the man many thought would eventually be Stan O’Neal replacement? Did he turn the job down? Was the board’s enthusiasm for him exaggerated? Some fear of subprime contagion? Loyalty to Blackrock?
Update 1:06: CNBC’s Charlie Gasparino says that Fink was offered the job, but he spooked the Merrill board by demanding a full-accounting of Merrill’s subprime exposure. This led the board to go in another direction, perhaps out of fear that Fink might turn down the job if the subprime exposure was too bad.
Update 2:01: The Journal confirms that the stock exchange will name
Duncan Niederaueras its new CEO.
Let’s assume for a moment that the rumors (and CNBC’s Bob Pisani) are right and the board of the New York Stock Exchange is holding an unscheduled meeting right now. Views about what is happening are divided, so we figured we’d go to the experts: our readers. What do you think is going on at the NYSE board meeting today?
William Porter earlier this week sold nearly 5% of his shares in the International Securities Exchange, one of the leading electronic options exchanges, according to documents obtained by DealBreaker. Porter, who also founded E*Trade and sits on its board, was one of the founders of ISE. He served on the board until term limits forced him to leave recently. Although he is the third largest holder of ISE shares, the sales have not yet been disclosed.
Porter sold over 95,000 shares for around six million dollars. The average share price was near $66 dollars. Prior to selling these shares, he owned around 5.1% of the company and will likely be required to file a Schedule 13D report noting the sale with the SEC. These sales appear to bring him just below the 5% threshold for reporting to the SEC, so subsequent sales will not need to be disclosed.
The ISE is currently the subject of a takeover bid by Eurex, Deutsche Börse’s derivatives arm. A spokeperson for ISE said that the company believes the transaction will close in the fourth quarter.
William Porter could not be reached for comment. The International Securities Exchange said it did not comment on trades in its shares.
Chicago Board of Trade shareholders accepted an $11.8bn merger proposal from the Chicago Mercantile Exchange yesterday, ending nine months of negotiations and an unremitting rival bid from IntercontinentalExchange. The results of yesterday’s shareholder vote, which will create the world’s largest futures exchange, were announced simultaneously by CBOT and CME last night.
CME Group will come into being next year and, continuing the industry’s amalgamative trend, is likely to pursue exchanges in New York and London.
Left out in the cold after an expensive campaign for CBOT, ICE is now a potential takeover target for New York Stock Exchange Euronext, Bloomberg News reports. According to Will Vicars, director of Caledonia Investments, NYSE Euronext’s “modus operandi to date has been acquisitions, and I think that will probably continue.”
Chicago Exchange Merger May Bring More Deals [Dealbook]
CME Acquisition of CBOT Turns Nymex, ICE Into Takeover Targets [Bloomberg]
CBOT-CME Is Done, at Last [Wall Street Journal]
CME and CBOT Shareholders Approve Merger [Chicago Board of Trade]
With a shareholder vote on Monday, the Chicago Mercantile Exchange increased its bid for the Chicago Board of Trade again today, all but securing a deal set to create the largest derivatives exchange in the world.
The new Merc bid is valued at $11.3bn, still short of the rival $11.4bn offer from the Atlanta based IntercontinentalExchange, but enough to win the support of Caledonia Investments, a major CBOT shareholder that previously resisted the Merc’s advances. The CBOT board has favored the cross-town merger since talks began last October and both CBOT and CME believe enough shareholder support now exists to push the deal through.
Unable to take a hint, ICE sent a letter to top CBOT officials on Tuesday saying it would consider sweetening its bid, the Wall Street Journal reports. Nonetheless, expect a new Chicago superexchange to come into being on Monday.
CME Sweetens CBOT Bid Ahead of Next Week’s Vote [Wall Street Journal]
A “bitter” lawsuit involving several former Philadelphia Stock Exchange owners, PHLX board members, Merrill Lynch, Citadel and others may soon be resolved. Ex-seatholder Chuck Ginsburg alleges that he and older people in the possession of seats weren’t consulted before a deal to sell Archipelago for $50 million in 2004 was rejected because CEO Meyer “Sandy” Frucher preferred to pursue a deal that would give him a big piece of equity.
Ginsburg claims that PHLX forfeited 90% of it equity when it accepted $7.5 million a piece from Merrill, Citadel, UBS, Credit Suisse, noting that each $7.5 million stake is now worth $84.2 million. The lawsuit also argues that an offer from Timberhill, valuing PHLX equity higher—“166%”—, was dismissed. Ginsburg et al believe they were cheated out on stock play they could have tapped with an Archipelago acquisition of PHLX. Yes, there is a Philadelphia Stock Exchange.
Earlier: Wall Street, PA
Philly Exchange Deal in the Works [NYP]
IntercontinentalExchange poured a little extra honey on its bid for the Chicago Board of Trade today, throwing a settlement over a longstanding dispute with the Chicago Board Options Exchange on top of its bid. ICE has been locked in a bidding war with the Chicago Mercantile Exchange for the Board of Trade.
Since its first days in the Nixon administration, Board of Trade has been battling the CBOE over exchange rights that allow members of the Board of Trade to trade options at the CBOE without having to buy a membership. The CBOE has been threatening to attempt to terminate those rights if the Board of Trade is taken over.
In the settlement announced today, ICE would pay Board of Trade members a total of $666.6 million for the the rights. Needless to say, the settlement offer only applies if ICE succeeds in its bid for the Board of Trade.
ICE and CBOE reach deal on exercise rights [Reuters]
The Chicago Mercantile Exchange “sweetened” its bid for the Chicago Board of Trade this morning.* The new offer would exchange each CBOT share for a 0.35 share of the CME, which adds up to a 16% increase from the original merger agreement. The CME is also promising a buyback of its own shares after the deal is done, lessening the dilutive effect of the acquisition on those shares. The new offer puts a value on the Board of Trade at somewhere around $9.2 billion.
This pushes the ball into Intercontinental Exchange Inc, which made a $10.1 billion in March. The Board of Trade rejected the offer as “not superior” to the offer already on the table. Not surprisingly, the new offer from the Merc makes the offer from ICE even more “not superior” than it was before in the view of Board of Trade directors. Everyone now wonders whether ICE can come back with an even better offer.
*Everyone keeps saying the bid was “sweetened.” We assume that this is very funny if you trade commodities or something. Is it a maple syrup futures joke? We don’t get it. When News Corp offers more for the Dow will that also be “sweeter” or just more money?
Chicago Merc Press Release [CME]
CME Raises Bid for CBOT To Fend Off Rival Offer [Wall Street Journal]
Chicago Merc Agrees to Pay More for Board of Trade [Bloomberg]
The latest twist in the battle to control the Chicago Board of Trade is a kind of conspiracy theory. According to this theory, New York and London banks are attempting to buy CBOT through their proxy, the Intercontinental Exchange, in order to capture the derivatives trading business from Chicago.
The Chicago Tribune plays the Chicago versus the New York-London axis to the hilt today, echoing the grand Midwest First nativism we thought had gone out of style with William Jennings Bryan and Robert McCormick.
“This is hand-to-hand combat, Chicago versus New York,” said Michael Greenberger, a former federal exchange regulator and now a law professor at the University of Maryland. “It’s a massive power play by New York and global banks against the Chicago futures infrastructure.”
Upstart ICE clears trades in New York and London, and on Thursday it will open a new trading center in Lower Manhattan.
There is at least a grain of truth in this. Many of the New York and London based brokerages are concerned that a unified Chicago exchange would exercise monopoly power over the derivatives market, and are hoping to see the ICE bid win.
N.Y. banks back ICE in futures power play [Chicago Tribune]
Why can’t we get a straight answer on this? Last week we reported that a source familiar with the market regulation work at the Securities and Exchange Commission had told DealBreaker that the New York Stock Exchange is still not in compliance with government regulations meant secure the best price available for stock traders. The NYSE had said that it would not meet a deadline for compliance in March but little has been reported or disclosed since. Neither the NYSE nor the SEC will comment on the record or off the record about the matter.
It’s this kind of thing that makes us turn on the little red alert lights here at DealBreaker. If the NYSE is fully compliant wouldn’t it be eager to get that news out to reporters making inquiries? The refusal to comment seems to speak volumes here, and those volumes seem to be titled We’re Still Not Complying.
Four days after our original story ran and still nothing from the regulators or the exchange, despite repeated requests for information. We know that other business journalists are looking into this now so it’s only a matter of time before this story spreads.
Earlier: NYSE: Still Not Complying With Reg NMS? [DealBreaker.com]
