March 1, 2024

DealBook: NYSE Euronext to Take Over Libor

Martin Wheatley, a British financial regulator, conducted a review of Libor that started the search for a new administrator.Carl Court/Agence France-Presse — Getty ImagesMartin Wheatley, a British financial regulator, conducted a review of Libor that started the search for a new administrator.

9:10 a.m. | Updated

The parent company of the New York Stock Exchange won a contract on Tuesday to administer and improve the controversial benchmark interest rate known as Libor.

The move could help provide a fresh start for the London interbank offered rate, which helps determine the cost of short-term loans around the world. The banks that help set the rate each day have been accused of conspiring to rig the rate for their own benefit before and during the financial crisis, leading to billions of dollars in fines and a few arrests.

NYSE Euronext announced on Tuesday morning that it planned to take over the administration of Libor early next year. Finbarr Hutcheson, the chief executive of NYSE Liffe, a NYSE Euronext subsidiary in London, said in a statement that his group was interested in “continuing the process of restoring credibility, trust and integrity in Libor as a key global benchmark.”

A new subsidiary, NYSE Euronext Rate Administration Ltd., “will be able to leverage NYSE Euronext’s trusted brand, long regulatory experience and market-leading technical ability to return confidence to the administration of Libor,” according to a statement from the company.

The decision comes just a few weeks after European regulators approved NYSE Euronext’s sale to IntercontinentalExchange, or ICE, an Atlanta-based operator of derivatives exchanges. NYSE Euronext has been trying to diversify its business beyond its traditional stock exchanges as stock trading volumes and revenues have fallen steadily.

Libor Explained

Until now, the daily process through which Libor is set has been run by the British Bankers’ Association, an industry group in London. A British government review of Libor led by Martin Wheatley, at the time the managing director of Britain’s Financial Services Authority, recommended last fall that the responsibility for formulating Libor should be given to an “independent party.”

NYSE Euronext beat other contenders, including the London Stock Exchange, said a person briefed on the process, who spoke on the condition of anonymity ahead of a public announcement.

The company was picked by an independent committee led by Sarah Hogg, chairwoman of the regulator responsible for financial reporting, after a tender process that started in February. The deal will still need to be approved by the Financial Conduct Authority, now led by Mr. Wheatley.

The so-called Wheatley Review recommended that Libor should continue to be set through daily consultations with the world’s largest banks. But while those banks now provide estimates of how much they are charging for short-term loans, in the future the administrators of Libor are also supposed to use data from actual short-term loans.

At least one regulator was critical of the selection of NYSE Euronext.

“We had a ‘fox guarding the henhouse’ issue here, and we should learn from that,” said Bart Chilton, a member of the Commodity Futures Trading Commission in the United States. “I firmly believe that having a truly neutral third party administrator would be the best alternative, and I’m not sure that an exchange is the proper choice.”

Julia Werdigier contributed reporting from London.

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DealBook: Stock Exchanges Prepare to Open

The New York Stock Exchange remained closed on Tuesday.Carlo Allegri/ReutersThe New York Stock Exchange remained closed on Tuesday.

Wall Street is preparing to open for business on Wednesday as New York slowly recovers from the wreckage of Hurricane Sandy.

The New York Stock Exchange and Nasdaq both plan to resume normal trading on Wednesday following the storm that flooded many parts of Manhattan and prompted widespread power outages. The market closed for two days as Hurricane Sandy battered down on the East Coast, forcing thousands of people to evacuate and causing millions of dollars in damage.

“It’s incredibly important to open these markets,” said Miranda Mizen, director of equities research at TABB Group. “It says New York is open for business.”

The New York Stock Exchange is one of the world’s most identifiable symbols of capitalism and its inability to operate is often viewed as a larger statement on stability of United States stock markets and the economy.

It’s rare for the stock markets to close operations for two days. The last time the New York Stock Exchange did so for weather-related reasons was 1888.

Hurricane Sandy Multimedia

After terrorists attacked various American landmarks including the World Trade Center, the Big Board closed for four days. The reopening was heralded around the world as a sign of the strength of the United States.

“Barring any unforeseen circumstances, we will be open,” said Larry Leibowitz, the chief operating officer of the NYSE Euronext, the parent of the Big Board. “We all see the need to get the exchange working as quickly as we can.”

Wall Street — the extensive network of exchanges, banks and regulators — has spent the past two days testing systems and assessing the markets in an effort to ensure the trading day goes smoothly. Roughly 30 staff members at the N.Y.S.E. have been sleeping at the company’s headquarters.

Connectivity, the trade execution between the firms and the exchanges, has been a big focus. Representatives from various utility companies have been present on many conference calls on the issue.

Mr. Leibowitz said that the N.Y.S.E. has been able to connect to others, but some trading firms with damaged data centers or facilities have had issues. One nearby building that houses several firms, according Mr. Leibowitz, sustained significant damage and could hamper their ability to operate. Such firms are now scrambling to move operations and do repairs to be ready for the open on Wednesday.

“Right now, there are a lot of connectivity problems,” Mr. Leibowitz said.

The N.Y.S.E. is set to open both the electronic platform and the physical trading floor. The exchange has plans for the 200 or so floor traders to be in place. A number of traders and other exchange personnel live in areas where mass transit has been suspended, so the N.Y.S.E. has arranged cars for many people.

The exchange had battled earlier rumors that the trading floor was under three feet of water. While the stock exchange appeared to be unscathed, many other buildings in the vicinity had been flooded and the area remained desolate on Tuesday.

Mr. Leibowtiz, who lives not far from the N.Y.S.E., walked through flooded streets Tuesday morning to get to work. But he said the water stopped about two blocks away from the Big Board.

Peter Eavis and Barry Meier contributed reporting.

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NYSE to Pay $5 Million to Settle Favoritism Charges

The case against the exchange, brought by the Securities and Exchange Commission, is part of a wider crackdown by the SEC on exchange compliance issues as the agency pursues more market structure-related investigations.

In a statement, the New York Stock Exchange, operated by NYSE Euronext, said on Friday the SEC was not alleging “any intentional misconduct or that the NYSE data delays caused any investor harm.”

“NYSE is pleased to have this matter resolved, and believes that the settlement is in the best interest of its shareholders, clients and employees,” said NYSE Euronext Chief Executive Duncan Niederauer.

The SEC’s case hinges on alleged violations of a rule known as REG NMS, which was adopted in 2005 to ensure customers get the best price and to promote fair access to market data.

The rule prohibits exchanges from improperly sending market data to proprietary customers before sending the information to the consolidated tape for broader public consumption.

The SEC said that NYSE violated the NMS rule beginning in 2008 by sending data through two of its proprietary feeds before sending it to the consolidated feeds.

NYSE agreed to retain an independent consultant to review its systems. The exchange operator said that technology upgrades in 2010 and 2011 corrected the problems at the center of the SEC’s investigation.

(Reporting By Sarah N. Lynch and Aruna Viswanatha; Editing by Jeffrey Benkoe and Steve Orlofsky)

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DealBook: NYSE Euronext Stakes Claim in London

Philippe Wojazer/Reuters

LONDON – Initial public offerings in London have come to a halt, but that has not stopped NYSE Euronext from trying to get in on the action.

The company, which already operates exchanges in New York, Paris and a number of major cities, said on Wednesday that it had signed up the first company to switch its London trading activity from the London Stock Exchange to NYSE Euronext London, its new exchange.

Groupe Eurotunnel, which operates the Channel Tunnel between Britain and France, will start trading on NYSE Euronext London on July 19. The company already has its main listing with NYSE Euronext in Paris.

The announcement comes as NYSE Euronext looks to bolster its presence in London, Europe’s financial capital.

NYSE Euronext already runs its derivatives business, NYSE Liffe, from London, but is looking to tap into the broader financial markets by tempting companies to switch their London-based trading activity to the exchange, as well as to entice new issuers to use its London bourse.

Despite NYSE Euronext’s global presence, its London operation is likely to face tough competition from the incumbent London Stock Exchange, and a current lack of new I.P.O.’s resulting from the market volatility caused by the financial crisis.

Diederik Zandstra, NYSE Euronext’s head of international listings, said he had been in touch with market participants and potential new issuers to explain why they should choose the firm’s London exchange over the London Stock Exchange.

“We’re offering issuers a choice,” Mr. Zandstra said in an interview. “Previously, many couldn’t list with NYSE Euronext because we didn’t have a London base.”

With financial markets reeling from the global economic meltdown, exchanges have been keen to move into new markets. Last week, Hong Kong Exchanges and Clearing agreed to buy the London Metal Exchange for £1.38 billion, or $2.14 billion, as the Asian financial firm looked to diversify away from its core equities business.

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DealBook: NYSE and Deutsche Borse Chiefs to Discuss Plans to Save Merger

Duncan Niederauer, left, chief of NYSE Euronext, with Reto Francioni of Deutsche Börse, on video, at a news conference in February.Mark Lennihan/Associated PressDuncan Niederauer, left, chief of NYSE Euronext, with Reto Francioni of Deutsche Börse, on video, at a news conference in February.

4:12 p.m. | Updated

The chief executives of NYSE Euronext and Deutsche Börse plan to meet on Wednesday to discuss the next steps in the planned merger of their two companies, as European antitrust regulators take steps to block the proposed deal, according to people briefed on the matter.

The two chiefs, Duncan L. Niederauer of NYSE Euronext and Reto Francioni of Deutsche Börse, will meet in New York as part of a regularly scheduled gathering of executives from both companies, these people added.

For months, the European Commission‘s antitrust office has raised concern about the creation of the world’s biggest stock exchange operator, arguing that the would create a monopoly on exchange-traded derivatives on the Continent. Any formal proposal to block the deal would require the approval of the full European Commission, as well as input from an array of antitrust experts from member nations.

Such a move is likely to prompt public lobbying by NYSE Euronext and Deutsche Börse, which have already extended the deadline for completing the merger in anticipation of antitrust opposition. The two exchange operators still have until about Feb. 9 to change commissioners’ minds.

A spokeswoman for the European Commission declined to comment. A spokesman for NYSE Euronext said in a statement: “NYSE Euronext has not yet received any official decision by the European Commission regarding the requested merger of both companies.”

European antitrust officials, led by Joaquín Almunia, have hinted for weeks that they intended to block the deal unless NYSE Euronext and Deutsche Börse agree to divest one of their European futures exchanges. Together, the two markets, Liffe and Eurex, would control the majority of exchange-traded derivatives trading on the continent.

But NYSE Euronext and Deutsche Börse have argued that the European Commission’s approach ignores the bigger market for derivatives that are traded over the counter. They have also said that within the world of exchange-traded derivatives, the market share of a combined Liffe-Eurex would be 19 percent, smaller than that of a primary competitor, the CME Group.

Neither company is willing to divest either Liffe or Eurex. Instead, they have proposed smaller remedies, including allowing competitors access to the Eurex trading system.

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DealBook: Justice Dept. Approves Merger of NYSE Euronext and Deutsche Borse

The Justice Department approved on Thursday the proposed merger of NYSE Euronext and Deutsche Börse, but required the sale of the German exchange’s stake in Direct Edge Holdings within two years.

The proposed settlement offered by the Justice Department is the latest obstacle that NYSE and Deutsche Börse have hurdled in their nearly yearlong bid to create the world’s biggest stock exchange operator.

But the biggest problem, obtaining antitrust approval from European Union regulators, has not yet been fixed. The European Commission has reportedly told the two exchange operators that their proposed antitrust remedies don’t go far enough, according to Bloomberg News. Some analysts have speculated that the two companies may be forced to divest one of their major derivatives-trading platforms altogether.

While the Justice Department’s antitrust team required other asset sales, the biggest required was the sale of the 31.5 percent stake in Direct Edge, the fourth-largest stock exchange operator in the country. Deutsche Börse has owned the stake through its International Securities Exchange subsidiary since 2008.

The Justice Department’s primary concern was that should NYSE and Deutsche Börse be allowed to combine, that new colossus — together with the stake in Direct Edge — would own too much market share.

“Without the divestiture and other restrictions obtained by the Justice Department, a combined NYSE and Deutsche Börse entity could influence the actions of Direct Edge, and thereby lessen the zeal of an aggressive and innovative exchange competitor,” Sharis A. Pozen, the Justice Department’s acting antitrust chief, said in a statement.

Besides selling the stake within two years, Deutsche Börse must also provide a written plan outlining how it will step back from all corporate governance roles at Direct Edge. (The German company has special voting rights and the ability to name three board members.)

“We are very pleased to have received the approval of the DOJ, an important milestone on our path to completing our compelling trans-Atlantic combination,” Duncan L. Niederauer, NYSE’s chief executive, said in a statement.

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DealBook: Shunning Nasdaq, LinkedIn Prepares a Big Board I.P.O.

In a coup for the New York Stock Exchange, the business-oriented social networking site LinkedIn said in a filing on Wednesday that it would list its new shares on the Big Board.

Last month, LinkedIn, which is expected to go public later this year, said it was still considering a listing on the Nasdaq or the New York Stock Exchange. The decision to go with the Big Board gives a boost to the exchange, which is in the midst of a takeover battle.

The Nasdaq OMX Group, best known as a popular home for technology stocks, recently teamed up with the IntercontinentalExchange to pursue a hostile $11 billion bid for NYSE Euronext, which has rebuffed the advance.

The Big Board has been a popular destination for several prominent Internet I.P.O.’s this year. On Wednesday, Renren, a Chinese social networking company based in Beijing, made its debut on the exchange.

The competition between the Nasdaq and the Big Board is expected to continue to heat up over the next two years, as more multibillion-dollar Web companies, including Groupon and Facebook, head to the public markets.

Although technology companies typically list on the Nasdaq, which is seen as friendlier to smaller, growth companies because of its flexible listing requirements, Peter Falvey, a managing director at Morgan Keegan, said the Big Board offered branding value.

“The N.Y.S.E. is often seen as on the side of bigger companies,” he said. But smaller companies might “get some benefit from saying, ‘We’re listed on the N.Y.S.E.,’ ” Mr. Falvey said. “It doesn’t get more blue chip than that.”

A representative for LinkedIn declined to comment on Wednesday.

Bank of America Merrill Lynch, Morgan Stanley and JPMorgan Chase are the lead underwriters for the offering.

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DealBook: Nasdaq-Led Bid for NYSE Euronext Turns Hostile

NYSERamin Talaie/Bloomberg News The floor of the New York Stock Exchange

The Nasdaq OMX and IntercontinentalExchange said on Monday that they would take their $11 billion offer for NYSE Euronext directly to shareholders after twice being rebuffed.

Nasdaq had warned two weeks ago that it might approach shareholders if the NYSE board continued to refuse to talk with it and ICE. NYSE Euronext, which is planning a merger with the Deutsche Börse, has said that there is too much regulatory risk in the Nasdaq-ICE proposal, among other issues.

Yet at the NYSE Euronext shareholders meeting on Thursday, a number of shareholders expressed dismay at the board’s resistance to negotiate with a rival suitor.

Jeffrey C. Sprecher, the chief executive of ICE, said in a statement on Monday: “The board of NYSE Euronext has twice rejected our superior proposal without meeting with us, despite the fact that their existing merger agreement with the Deutsche Börse allows them to talk with us. While we are hopeful that the board will decide to consider this transaction, we are taking our proposal to NYSE Euronext stockholders upon the commencement of this exchange offer to provide the opportunity to consider our proposal directly.”

Under the terms of the Nasdaq-ICE offer, each share of NYSE Euronext would be exchanged for $14.24 in cash, 0.4069 share of Nasdaq OMX common stock and 0.1436 share of ICE common stock.

The move escalates the battle between the two long-time rivals. Deutsche Börse plans to begin its stock tender offer this month and conclude in early July.

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DealBook: NYSE Euronext: A Fight About Cost Savings

The battle over NYSE Euronext may come down in part to a question of who can save more in a deal with the Big Board.

NYSE Euronext’s chief executive, Duncan Niederauer, told The Financial Times that his company had essentially understated the amount of cost savings in its proposed merger with Deutsche Börse by about 100 million euros. That puts the figure at “closer to” 400 million euros, or about $583 million.

In his interview, Mr. Niederauer said that the savings would come in part from combining NYSE Euronext’s derivatives clearing platform with Deutsche Börse’s, allowing customers to pay just once.

Hinted at for some time, the revised numbers are meant to push back against the more than $700 million in cost savings estimated by the Nasdaq OMX Group and the IntercontinentalExchange in their proposed takeover of NYSE Euronext.

That’s in part because there’s more overlap in the Nasdaq-ICE proposal, especially in combining Nasdaq with NYSE Euronext’s stock-trading business, which would be a merger of the nation’s two biggest stock market operators.

Unsurprisingly, Nasdaq and ICE are skeptical about NYSE Euronext’s new numbers. In a statement on Monday, they question how, after more than two years of due diligence, NYSE Euronext was suddenly able to find an additional 100 million euros of cost savings. They also questioned where the additional savings come from, since the combined NYSE Euronext and Deutsche Börse plan to maintain two headquarters and two technology platforms.

In a separate presentation (below), Nasdaq and ICE highlighted what they said were flaws in NYSE Euronext’s own merger history, including missing both expense reduction and revenue combination targets in the original combination of the New York Stock Exchange and Euronext. They also pointed to a $1.6 billion write-down that NYSE Euronext took in late 2008 to reflect the lower value of the merger.

Nasdaq’s chief executive, Robert Greifeld, has said that his mooted cost savings would come in large part from combining data centers and backoffice systems. But NYSE Euronext has fought back by saying that its merger with Deutsche Börse would create minimal job cuts in the United States, whereas the Nasdaq offer’s cost savings are built on widespread pink slips.

That argument appears to have gotten the ear of Senator Charles E. Schumer, Democrat of New York. In a letter to the chief executives of Nasdaq and ICE, Mr. Schumer demanded more information about what their deal would mean for New York City jobs.

According to estimates prepared for him by NYSE Euronext, the Nasdaq-ICE proposal would lead to more than 1,000 job cuts in the United States — and 800 in New York City.

Here’s the full text of the letter that Mr. Schumer sent to Nasdaq and ICE:

Robert Greifeld
Chief Executive Officer President
The NASDAQ OMX Group, Inc
One Liberty Plaza
165 Broadway
New York, NY 10006

Jeffrey Sprecher
Chairman Chief Executive Officer
IntercontinentalExchange, Inc.
2100 RiverEdge Parkway
Suite 500
Atlanta, GA 30328

Dear Mr. Greifeld and Mr. Sprecher,

I write you today regarding an area of critical importance to me with respect to your ongoing efforts to acquire NYSE Euronext. As we previously discussed, I am concerned with the potential impact a NASDAQ/ICE takeover of NYSE Euronext would have on jobs in and around New York City. This would be a major consideration in judging any potential transaction.

I understand that the NYSE Euronext board of directors has once again reaffirmed its support for the Deutsche Börse transaction, but I also understand that NASDAQ and ICE may further revise their proposal or take it directly to NYSE Euronext’s stockholders. Accordingly, I wanted to follow up on our previous conversation, during which I requested your best estimates of expected job losses in the New York City area that would result from a NASDAQ/ICE takeover of NYSE Euronext. By your own account, the business rationale for a NASDAQ/ICE transaction appears predicated largely on over $700 million in so-called “cost synergies”. That almost certainly means significant job losses. At my request, NYSE Euronext estimated that the NASDAQ/ICE proposal, if effectuated, would result in the loss of 1,000-1,100 U.S. jobs, including approximately 800 in the New York City area.

Prior to taking additional steps in your acquisition efforts, please provide me with your best estimate of how many jobs would be lost in the New York City area in the event of a NASDAQ/NYSE combination, and an explanation for how the claimed cost synergies would be achieved in light of your estimated level of job losses.

Please let me know if you have any questions or would like to discuss this further.


Charles E. Schumer
United States Senator

Nasdaq and ICE presentation on NYSE Euronext deal cost savings

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Nasdaq enters bid for NYSE

Nasdaq enters bid for NYSE
Nasdaq OMX Group Inc. and another U.S.-based market, the IntercontinentalExchange Inc., submitted a joint $ 11.3 billion bid Friday for NYSE Euronext, the parent company of the New York Stock Exchange. The offer, which was expected, raises the possibility of a bidding war for the NYSE with Deutsche Boerse. […] stocks are becoming a smaller part of the trading business. Just last year, after the …