NYSE Euronext

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NYSE Euronext
Nyse eur 4cp.jpg
Founded April 2007
Headquarters New York and Paris
Key People Jan-Michiel Hessels, Chairman; Marshall Carter, Deputy Chairman; Duncan Niederauer, CEO; Jean-Francois Théodore, Deputy CEO
Products Cash equities, futures and options on interest rates, equity indexes, bonds and commodities, and market data
Website nyx.com

NYSE Euronext (NYSE/New York and Euronext/Paris: NYX) is the holding company created by the combination of NYSE Group, Inc. (parent of the New York Stock Exchange) and Euronext N.V. It was launched on April 4, 2007.

The merger created the first transatlantic stock and derivatives exchange - following a fierce takeover battle for control of Euronext between the NYSE Group and Deutsche Börse - and incorporates the world's largest cash equities exchange and the third-ranked futures platform.[1]

NYSE Euronext includes six cash equities exchanges in five countries and six derivatives exchanges, together offering trading, clearing and settlement in cash equities; equity, interest, commodity and currency derivatives; and bonds.

NYSE Euronext was ranked as the world's fourth-largest derivatives exchange by contract volume in 2010, maintaining their position from 2009, according to the Futures Industry Association's annual survey of the world's leading derivatives exchanges.[2]

The 2010 FIA report, which was published in March of 2011, states that the number of contracts traded on NYSE Euronext rose by 24.6% percent in 2010 to 2.155 billion contracts, which ranks it between Eurex above, and the National Stock Exchange of India below.

Contents

History

  • In June of 2008 it formed a deal with the State of Qatar to turn the Doha Securities Market (DSM) into an international cash and derivatives exchange. NYSE Euronext originally was to invest $250 million into DSM for a 25 percent stake in the exchange, the largest investment the company had ever made in a foreign exchange. It later reduced the stake to 20 percent and the amount invested to $200 million, and the deal closed on June 19, 2009. NYSE Euronext and Qatar Holding rebranded the Doha Securities Market as "The Qatar Exchange".[3] [4] The exchange will use NYSE Euronext technology for its cash and derivatives markets.[5]
  • In July of 2008, NYSE Euronext announced it had completed through its affiliate Euronext NV the acquisition of a 5 percent equity position in the Multi Commodity Exchange (MCX), India’s largest commodity derivatives exchange. The 5 percent equity investment was the maximum equity interest permitted by a single foreign investor in exchanges under current Indian law.[10]
  • On Nov. 6, 2008, NYSE Euronext announced it had signed a development partnership with the Zhengzhou Commodity Exchange as part of the exchange’s “major expansion in Asia.”[11]
  • NYSE Euronext developed its Universal Trading Platform, an electronic trading platform, and began trading NYSE Euronext's European bond markets in December 2008. The platform rolled out across its cash equities, options and futures markets in the US and Europe during 2009.
  • In January 2009, NYSE Euronext received approval for a joint venture with BIDS Trading to launch a new block trading venue to allow dark orders on BIDS to interact with displayed and reserve orders on NYSE. The venue is set to launch on Jan. 29, 2009, and to be called The New York Block Exchange (NYBX). It will operate as a facility of NYSE and be accessible via BIDS Trading and open to all NYSE members.[12]
  • In July of 2009, it was revealed that NYSE Euronext, along with the White House and Pentagon, had been targeted by cyber attacks. The NYSE said in a written statement that its public Web site - nyse.com - had been the subject of a "denial of service" cyber attack. The exchange said in the statement that nyse.com had not experienced any impact. Such an attack had not and could not impact the trading and data systems of NYSE Euronext markets, which operate on private networks, the exchange said. The exchange said it would continue to work with authorities on the situation.[15]
  • On Aug. 27, 2009, NYSE Euronext said it would buy NYFIX Inc. in a $144 million all-cash transaction to bolster its trading technology. NYSE Technologies, Inc. (a subsidiary of NYSE Euronext), will acquire the New York-based company at $1.675 per share, roughly a 95 percent premium over NYFIX's most recent 86 cents-per-share closing price.[16]
  • On May 12, 2010, NYSE Euronext said that it would terminate its contract with LCH.Clearnet and start clearing its trades in-house.[17]
  • In June 2010, NYSE Euronext sold a trading platform to the Warsaw Stock Exchange (WSE). Polish Treasury Minister Aleksander Grad said earlier in June that the WSE was in talks with a strategic partner that may, after the company's initial public offering planned for November, buy a minority stake in the exchange from the Treasury.[18]
  • In July 2010, the exchange launched a new London-based securities market, NYSE Euronext London.[20] Similar to its existing Continental Europe venue, the new launch aims to attract international issuers looking to list in London. NYSE Euronext London offers international issuers the opportunity to list shares and depositary receipts on the Official List of the UK Listing Authority. In addition, issuers will benefit from access to a broad investor base and having their securities trade on NYSE Euronext’s Universal Trading Platform that connects all its European securities markets. This provides international issuers access to the largest equity market in Europe with a combined market capitalization of 3.3 trillion euro and over 6 billion euro of equity securities traded daily.[21]
  • In early August 2010, CEO Duncan Niederauer said expansion of the exchange group's U.S. derivatives business would likely be delayed until 2011 due to a regulatory logjam in response to the May 6 flash crash and the financial reform bill signed into law in July. Niederauer said it may be January before its U.S. futures arm can launch new interest-rate products because regulators have to first approve its plans for a new clearinghouse.[23]
  • In early February 2011, Deutsche Boerse and NYSE Euronext announced that they were in "advanced talks" to merge.[24] The proposed deal would give Deutsche Boerse's shareholders 60 percent control and create a global exchange "behemoth" with more than $20 trillion in annual trading volume.[25]
  • On April 1, 2011, Nasdaq OMX and ICE made a counter-offer to acquire NYSE Euronext for $11.3 billion, a 19 percent premium over the price proposed by Deutsche Boerse.[26] As part of the proposal, ICE would purchase NYSE Euronext’s derivatives businesses, and NASDAQ OMX would retain NYSE Euronext’s remaining businesses, including the NYSE Euronext stock exchanges in New York, Paris, Brussels, Amsterdam and Lisbon, as well as the U.S. options business. ICE and NASDAQ OMX would continue to operate as separate businesses.[27] NYSE Euronext continued to rebuff repeated takeover attempts from Nasdaq OMX and ICE, maintaining that their counter-offer did not "provide compelling value" and had "unacceptable execution risk." [28]
  • In July 2011, Deutsche Börse won shareholder support for its $9 billion merger with NYSE Euronext, clearing one of the biggest hurdles to the merger. More than 80 percent of the outstanding shares of Deutsche Börse approved the tender offer.[29]
  • On Aug. 1, 2011, NYSE Euronext made a strategic acquisition of provider of market access products

Metabit in an effort to accelerate growth in Asia. It was announced that Metabit would operate as a product line within the NYSE Technologies portfolio. The transaction was expected to close in third quarter of 2011. Terms of the acquisition were not disclosed.[30]

Data Center

NYSE Euronext announced on August 27, 2010, that its U.S. data center in Mahwah, N.J. had successfully completed the migration of more than 4,500 equities issues listed on the New York Stock Exchange and NYSE Amex.

The migration of all NYSE and NYSE Amex equities issues to the U.S. liquidity center marks the completion of a significant part of the phased migration of NYSE Euronext's U.S. markets.

NYSE Euronext completed the transition to Mahwah of NYSE Arca and NYSE Amex options, as well as NYSE Arca equities, in April of 2011.[31]

Leadership

Duncan Niederauer was appointed CEO on Nov. 14, 2007, following John Thain 's departure to become chairman and CEO of Merrill Lynch. Niederauer, a former Goldman Sachs executive, joined NYSE Euronext as president and co-chief operating officer on Apr. 9, 2007.[32]

Dominique Cerutti has been with NYSE Euronext since December 2009. He became president, deputy CEO and head of Global Technology in January 2010, replacing former deputy CEO Jean-Francois Théodore.

Other senior executives include:
Andrew T. Brandman, Executive Vice President & Chief Administrative Officer
Mary L. Brienza, Executive Vice President & General Auditor
Vincent Van Dessel, Chairman & Chief Executive Officer of NYSE Euronext Brussels
Phillipe Duranton, Group Executive Vice President & Global Head of Human Resources
Michael S. Geltzeiler, Group Executive Vice President & Chief Financial Officer
John K. Halvey, Group Executive Vice President & General Counsel
Garry P. Jones, Group Executive Vice President & Head of Global Derivatives
Luis Laginha de Sousa, Chairman & CEO of Euronext Lisbon
Catherine Langlais, Executive Legal Director & General Counsel
Lawrence Leibowitz, Chief Operating Officer
Cees Vermaas, CEO of NYSE Euronext Amsterdam
Roland Bellegarde, Group Executive Vice President & Head of European Execution

Jan-Michiel Hessels, chairman of Euronext’s supervisory board, was appointed as chairman of NYSE Euronext following the merger, with NYSE Group chairman Marshall Carter becoming deputy chairman.

Contract Volume

2009

NYSE Euronext ranked as the world's fourth-largest derivatives exchange by contract volume in 2009, according to the annual Futures Industry Association's survey of the world's leading derivatives exchanges.[33]

The FIA report, published in early April 2010, notes that the number of futures and options traded on NYSE Euronext rose 3.2 percent in 2009 to 1.730 billion, ranking it one place behind the CME Group but one ahead of the Chicago Board Options Exchange (CBOE).

NYSE Group Companies

NYSE Group operates and regulates two securities exchanges: the New York Stock Exchange LLC ("NYSE") and NYSE Arca, Inc. NYSE Group is a leading provider of securities listing, trading and related information products and services. NYSE Group was formed in connection with the merger of the NYSE and Archipelago, which was completed on March 7, 2006.

NYSE

The NYSE is the world's largest and most liquid cash equities exchange. For 215 years, the NYSE has facilitated capital formation, serving individual and institutional investors, the trading community and listed companies. As of Dec. 31, 2006, 2,713 issuers, which include operating companies, closed-end funds and exchange traded funds ("ETFs"), were listed on the NYSE.[34], and the NYSE's listed operating companies represented a total worldwide market capitalization of over $25.1 trillion. During 2006, on an average trading day, approximately 1.67 billion shares, valued at over $63 billion, were traded on the NYSE. The NYSE operates a hybrid market in which orders are electronically transmitted for execution. Specialists on the trading floor are charged with maintaining fair, orderly and continuous trading markets in specific stocks. Floor brokers act as agents on the trading floor to facilitate primarily large or complicated orders.

NYSE Arca

NYSE Arca was the first open, all-electronic stock exchange in the United States, with one of the leading market positions in the trading of exchange-listed securities and ETFs. NYSE Arca is also an exchange for trading equity options. Through NYSE Arca, customers can trade approximately 8,875 equity securities and more than 152,000 option contracts. NYSE Arca's trading platforms link traders to multiple U.S. market centers. The technological capabilities of NYSE Arca's trading systems, combined with its trading rules, have allowed NYSE Arca to create a large pool of liquidity. During 2006, on an average trading day, over 822 million shares, valued at over $28.6 billion, were traded through NYSE Arca's trading platforms.

NYSE Liffe U.S.

NYSE Liffe U.S., launched in 2008, is NYSE Euronext's U.S.-based futures market. NYSE Liffe's initial products are futures on gold and silver, a franchise bought from CME early in 2008 (the contracts were part of the CBOT's precious metals complex).[35] NYSE Liffe U.S. initially cleared the precious metals complex trades at the CME Groupthrough the end of the first quarter of 2009 and then switched clearing over to the Options Clearing Corporation on March 30 , 2009.[36]

On March 10, 2010, NYSE Euronext announced that it sold a significant minority ownership stake in NYSE Liffe U.S. to six trading firms and liquidity providers: Citadel Securities, DRW Ventures LLC (an affiliate of DRW Trading Group), GETCO, Goldman Sachs, Morgan Stanley, and UBS. NYSE Euronext remained the largest shareholder in NYSE Liffe U.S., managing the exchange’s daily operations. NYSE Liffe U.S. will continue to operate under the supervision of a separate Board of Directors, chaired by James J. McNulty, former CEO of the Chicago Mercantile Exchange.[37]

NYSE Liffe US introduced equity indexes in September 8, 2009. The exchange launched futures on the MSCI benchmark indices such as: MSCI EAFE, MSCI Emerging Markets and MSCI USA.[38]

In April 7, 2010, the NYSE Euronext announced plans to launch a suite of interest rate futures contracts in the third quarter 2010 to directly compete for market share with CME Group and ELX on NYSE Liffe U.S. The short- and long-term interest contracts include Eurodollar futures, as well as 2-year, 5-year, 10-year and 30-year U.S. Treasury futures. Options on these futures are expected to be launched in fourth-quarter 2010.[39] Trades will be cleared at the Depository Trust & Clearing Corporation. [40]

Launching Eurodollar futures is not new to NYSE Euronext, which offered a version of Eurodollars in 2003. That product failed, however, when Euronext could not force regulatory action that would have allowed firms to shift open interest positions from CME Group to Euronext.

As of the summer of 2008, NYSE Euronext already had a U.S. options business through its Arca platform, and had started to migrate some elements of its London-based Liffe futures operation to the U.S.[41]

The NYSE said in early February of 2009 that for the first time in its history it would pay all market participants for providing liquidity to its market, according to NYSE Euronext, the exchange's parent company.[42]

Euronext Companies

Euronext, a relatively new financial entity when compared to some of the stalwarts in the industry, was formed on Sept. 22, 2000. Euronext was the first genuinely cross-border exchange organization. Following the merger of the Paris, Amsterdam and Brussels exchanges in 2000, Euronext acquired the London-based derivatives market, the London International Financial Futures and Options Exchange, and merged with the Portuguese exchange, BVLP, in 2002. As a result, Euronext now operates regulated cash and derivatives markets in Belgium, France, the UK (derivatives only), the Netherlands and Portugal. NYSE Euronext now refers to all of its European derivatives markets as Liffe.

Euronext has integrated its constituent markets based on a horizontal market model designed to generate synergies by incorporating the individual strengths and assets of each local market. This business model covers technological integration, the reorganization of activities into cross-border, strategic business units and the harmonization of market rules and the regulatory framework.

Euronext’s IT integration was completed in 2004, when a four-year migration plan resulted in harmonized IT platforms for cash trading (NSC) and derivatives trading (LIFFE CONNECT). As a result, every market participant has a single point of access to trading. Euronext’s IT structure was rationalized in 2005 with the creation of Atos Euronext Market Solutions (AEMS), an IT services-related vehicle between Euronext and Atos Origin.

Additionally, Alternext was formed in 2005 by Euronext to help small and mid-class companies in the Eurozone seek financing.

Liffe is one of the largest futures and options exchanges in the world. It operates a globally distributed central order book for its products through the LIFFE CONNECT electronic trading platform and, since October 2005, Bclear, which is a service that allows transactions that are executed off-exchange to be brought to Liffe for trade confirmation administration and clearing subject to the rules of the exchange.

During the first 10 months of 2007, Liffe volume totaled 799 million contracts, up 29 percent from a comparable period in 2006. Aggregate open interest across all products as of the end of October was 83.8 million contracts.

NYSE Euronext Business Breakdown by Revenue

Based on third-quarter 2007 non-GAAP net revenues (excluding activity assessment fees, and liquidity payments, routing and clearing fees) NYSE Euronext revenues from its primary business activities are represented below as a percentage of total net revenues[43]:

  • Derivatives trading accounts for 25 percent
  • European cash trading accounts for 18 percent
  • U.S. cash trading accounts for 12 percent
  • Market data accounts for 13 percent
  • Listing accounts for 12 percent

Governance

The NYSE Euronext board of directors is elected annually and made up of a majority of independent directors, an independent non-executive chairman and deputy chairman, plus a CEO and deputy CEO. Current members include:[44]

Regulation

Each of NYSE Euronext’s markets is regulated in accordance with local requirements. The merger was negotiated in such a way that no additional requirements were necessary for listed companies, in particular for European issuers who had been guaranteed the maintenance of their own regulatory framework and protection against the application of American law, in particular the Sarbanes-Oxley Act.[45][46]

In July 2007, the member regulation, enforcement and arbitration operations of the New York Stock Exchange combined with the National Association of Securities Dealers (NASD) to form the Financial Industry Regulatory Authority (FINRA).[47] FINRA, the securities industry's largest non-governmental regulatory organization, is responsible for conducting the regulatory oversight of the more than 5,000 securities firms and 666,000 registered representatives in the United States.

Flash Crash Response

On July 15, 2010, NYSE Arca filed with the SEC to introduce a new price collar designed to safeguard the execution of market orders. The new collar will prevent market orders to buy stock from executing or routing to another trading venue at a price above the collar.[48] Conversely, market orders to sell will not execute or route at a price below the trading collar. The collar for issues priced at $25 or less will be 10 percent above or below the last trade price; for issues priced above $25 up to and including $50, the collar will be 5 percent; and for issues above $50, the collar will be 3 percent. These limits also will help prevent erroneous trades from inadvertently triggering the individual-stock circuit breakers introduced last month, and are consistent with those in the newly implemented rules concerning the cancellation of erroneous trades.

The collar was the latest in a series of steps[49] by the exchange aimed at protecting investors against a repeat of the May 6, 2010, record decline in the stock market, which came to be known as the "flash crash."

Other actions:

  • A pilot program of circuit breakers for individual issues was first rolled out on June 11 for stocks in the Standard & Poor's 500.
  • An expansion of the above pilot program to cover 344 exchange traded products plus all stocks in the Russell 1000 index is planned for later this month, pending SEC approval.
  • All markets have proposed amendments to existing rules concerning clearly erroneous trades, to make the cancellation of such trades -- when they occur in connection with an individual stock circuit breaker -- transparent and predictable for market participants.
  • NYSE Arca has revised its market order routing to further enhance its interaction with the New York Stock Exchange when a Liquidity Replenishment Point has been reached and other individual-stock safeguards imposed by primary markets.

NYSE History

The New York Stock Exchange traces its origins to 1792, when 24 New York City stockbrokers and merchants signed what was known as the Buttonwood Agreement, forged under a Buttonwood tree. Throughout its history, membership prices have varied widely: In 1871, a seat sold for $2,780, and in December 2005 a membership sold for a record $4 million.

NYSE Organization

  • The exchange was first organized on May 17, 1792.
  • It was incorporated on Feb. 18, 1971, as the New York Stock Exchange, Inc., a not-for-profit corporation.
  • It was established as a for-profit corporation, the NYSE Group, March 7, 2006.
  • It announced an agreement to combine NYSE and Euronext to "redefine the marketplace for trading cash and derivatives securities, producing significant benefits for shareholders, issuers and users," on June 1, 2006.
  • The creation of NYSE Euronext occurred on Apr. 4, 2007.

NYSE Firsts and Records

NYSE Volume Market Highlights

Daily share volume (first day over):

  • 1 million - 1886
  • 5 million - 1928
  • 10 million - 1929 (It took one year to double share volume, and another 49 to quintuple it.)
  • 50 million - 1978
  • 100 million - 1982
  • 500 million - 1987 (It took only five years to quintuple share volume, culminating in the stock market crash of Oct. 19, 1987 - the crash was actually fairly short lived compared to the "furor" it caused.)
  • 1 billion - 1997 (It took another 10 years to double share volume.)
  • 2 billion - 2001
  • 3 billion - 2005
  • 4 billion - 2007
  • 5 billion - 2007

NYSE Highs And Lows

  • 5,799,792,281 shares on Aug. 16, 2007; lowest volume day: 31 shares on March 16, 1830
  • Dow Jones Industrial Average biggest single-day jump: 499.19 points, March 16, 2000
  • Dow Jones Industrial Average biggest single-day drop: 684.81 points, Sept. 17, 2001

References

  1. Analysts' Presentation. NYSE Euronext.
  2. 2010 Annual Volume Survey. FIA magazine.
  3. NYSE invests in Qatari stock exchange. Forbes.
  4. THE STATE OF QATAR LAUNCHES “QATAR EXCHANGE” AS IT SIGNS TODAY FORMAL TERMS OF STRATEGIC PARTNERSHIP WITH NYSE EURONEXT. NYSE Euronext.
  5. The State of Qatar and NYSE Euronext Announce Major Strategic, Partnership. NYSE Euronext.
  6. Rebranding of NYSE Alternext US to NYSE Amex. NYSE Euronext.
  7. "NYSE Euronext to Acquire the American Stock Exchange,” 1/17/08. NYSE Euronext.
  8. "NYSE Snaps Up Amex, Ending Long Rivalry,” 1/18/08. Yahoo!News.
  9. Press Release. NYSE Euronext.
  10. NYSE Euronext Buys 5 Percent in MCX. CommodityOnline.
  11. Press Release. eFinancial News.
  12. NYSE and BIDS block trading venture approved by SEC. The Trade News.
  13. Credit Suisse, UBS, Nomura Join NYSE Euronext’s SmartPool. Bloomberg.
  14. NYSE EURONEXT AND DTCC TO CREATE JOINT VENTURE FOR MORE EFFICIENT CLEARING OF U.S. FIXED INCOME SECURITIES AND DERIVATIVES. NYSE Euronext.
  15. Report: Cyber-Attack Hit NYSE, White House. TheStreet.com.
  16. NYSE Euronext buying NYFIX in $144 million deal. Forbes.
  17. NYSE Euronext Challenges CME. EFinancialNews.
  18. Warsaw Bourse To Buy Trading Platform From NYSE Euronext. Dow Jones.
  19. NYSE Euronext Recruits Electronic Mkt Makers To Amex Platform. Dow Jones Newswires.
  20. Press Release. NYSE Euronext.
  21. Press Release. NYSE Euronext.
  22. Press Release. NYSE Euronext.
  23. NYSE Euronext Sees Delay For U.S. Futures Push. Dow Jones Newswires.
  24. Analysis: Boerse/NYSE deal markets global endgame. Reuters.
  25. D.Boerse-NYSE deal faces antitrust snags. Reuters.
  26. Nasdaq OMX, ICE Raise Stakes for NYSE Euronext in Counterbid. Securities Technology Monitor.
  27. Press Release. Nasdaq.
  28. NYSE Again Rejects Nasdaq-ICE Bid. Nasdaq.
  29. Deutsche Borse Wins Shareholder Approval of NYSE Euronext Deal. The New York Times.
  30. Press Release. NYSE.
  31. NYSE Euronext finishes move to Mahwah data center. Reuters.
  32. Press Release. NYSE Euronext.
  33. 2009 Annual Volume Survey. FIA magazine.
  34. "Listed Company Directory”. www.euronext.com.
  35. NYSE Moving to Boost Competition with CME. Chicago Business.
  36. OCC News Summer 2009. OCC.
  37. Press Release:NYSE Liffe U.S. Completes Sale of Ownership Stake to Leading Market Participants. NYSE Euronext.
  38. NYSE Liffe US. NYSE Euronext.
  39. NYSE To Launch Interest-Rate Futures in Third Quarter. WSJ.com.
  40. NYSE plans to launch interest rate futures. Financial Times.
  41. NYSE Euronext To Have U.S. Futures License By July - CEO. NASDAQ.
  42. NYSE Joins the Crowd and Pays for Liquidity. Traders Magazine.
  43. "Record Year for NYSE Euronext in 2007”. NYSE Euronext.
  44. Euronext Board of Directors. Euronext.
  45. "AlterNews, July 2007”. Euronext.
  46. "NYSE Group and Euronext N.V. Agree to a Merger of Equals". NYSE Euronext.
  47. News Release. FINRA.
  48. Press Release. NYSE Euronext.
  49. Press Release. NYSE Euronext.
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