by Joe Shea
February 15, 2011
N.Y.S.E. BOUGHT OUT BY GERMANY'S FRANKFURT ECHANGE
BRADENTON, Fla., Feb. 15, 2011, 9:30 a.m. -- Just two days ago, the New York Times ran a very short story saying that anonymous Deutsch Börse officials in Frankfurt, Germany, had denied a story in the Wall Street Journal several days before saying that the German exchange, based in Frankfurt but a global player, was buying the New York Stock Exchange, home of the Big Board and its storied trading floor, and now officially known as NYSE Euronext.
That came three days after the Journal reported that the two were in talks.
For the space of a breath, it appeared that two great institutions of American journalism were at sharp odds on the facts of a vitally important international story. One, with an air of disbelief, was calling the whiole story a lie. The other made it seem like it was already accomplished.
On Monday, following up on the story, the Journal reported that the Deutsche Börse would have 7 of 17 directors on the board of the merged exchanges, which trade the securities of every major public company in the world.
Today, the deal seems to be a fait accompli. Within the past hour, I spoke with Robert Rendine, a spokesman for the NYSE, who told me that I should "be ready" for a statement, which suggests to me that the deal is imminent. According to the Journal, authorities in Paris suspended trading in NYSE Euronext shares this morning in anticipation of major news.
Just a few minutes ago, shortly after the NYSE's trading floor opened at 9:30 a.m., the deal was announced.
The $10-billion all-stock deal allows the NYSE to trade risky and highly profitable derivatives - and any other kind stocks and bonds - away from the prying eyes of Securities Exchange Commission regulators. In the derivatives industry, which spawned the sub-prime crisis and the global recession, the complex instruments being traded present huge risks, as the sub-prime crisis revealed.
With SEC regulators out of the picture - they have no authority to regulate foreign firms - the rewards and risks will enjoy a far greater measure of secrecy under German laws. The next time many millions of Americans lose their homes and jobs - and even their industries - as the result of bankers' mistakes, there will be little way of knowing why it happened.
The merged entity will be 60 percent German-owned and 40 percent American-owned, while American shareholders will control 55 percent of the stock and German shareholders 454 percent of the stock. NYSE Euronext CEO Duncan Niederauer called that a "balanced" ownership that will serve both parties well.
"We have an international board and they have an internationmal board," the president of NYSE Euronext said, declining to agree that Americans have lost control of its major securities institution. The suggestion was that money has no nationality.
But, he said on CNBC, "It's already 50 percent outside of the U.S."
"It's a great deal for Germany, and it's another black eye for America," said possible presidential candidate and real estate billionaire Donald Trump. "It's ridiculous."
As for the name of the merged institutions, none has been decided, Niederauer said. That issue, which New York's senior U.S. Sen. Charles Schumer has addressed, is a contentious one. The merged entity should retain the words New York in its name, Sen. Schumer insists.
"I think overall it's a good thing," Schumer said about the deal. "I have a concern about the name," he added.
"'NYSE' is not off the table" as part of the name, he said.
A CNBC anchor, Mark Haines introduced Niederauer as "the man who sold an American icon to foreigners," a comment Niederauer brushed off with a laugh. "That's what you get when you give a big exclusive to CNBC," he said.
Haines interviewed another NYSE shareholder who said he didn't like the shareholder's end iof the deal. And, he added, "It's like selling the Statue of Liberty."
Founded beneath a spreading buttonwood tree outside of 68 Wall Street in Old New York on May 17, 1792, by a small group of 24 stock brokers who signed what is now known as the Buttonwood Agreement.
As for the iconic NYSE trading floor at 11 Wall Street in the heart of the financial district, "This place isn't going anywhere," Niederauer said. The trading floor has moved several times during its long history.
This story will be updated throughout the day.