A half-dozen centuries ago, a competitor who “entered the lists” was riding onto a mock battleground — the site of jousting and other deeds of arms. Today, a “listings” battle is being contested not merely between corporate worthies, but between the venues themselves.
The decisions by Charles Schwab Corp. and Cadence Design Systems Inc. to drop themselves from the New York Stock Exchange and list solely on the Nasdaq Stock Market are just two recent maneuvers in a long-running rivalry — one that promises good news for corporate issuers.
“The competition for the attention of CFOs and management should be a big winner” for companies, says Jamie Selway, founder and managing director of brokerage White Cap Trading. Selway believes that the NYSE and Nasdaq — which derive roughly one-third of their revenues from listing fees — will continue to introduce trading-technology enhancements and value-added services.
Both the NYSE and Nasdaq maintain that companies should regularly review their listing decision. “To the extent that Corporate America chooses not to do that, it leads to an unhealthy situation,” says Robert Greifeld, president and chief executive officer of Nasdaq. “The implicit cost to investors of markets that do not take advantage of developing technology affects every trade.” A spokesman for the NYSE stated that every company “has that duty to the shareholders to make sure they’re listed on the right marketplace” and should evaluate it “in a way that benefits their shareholders the best.”
Complicating that evaluation: Listing and trading are not necessarily linked. That’s been more true than ever since last April, when the Securities and Exchange Commission passed an amendment to the “trade-through rule,” part of Regulation National Market Structure. In simplest form, the amended rule requires that all investor trades be executed at the best price, even if stock markets must fill the order through a competitor.
Not long after the passage of the trade-through rule, Nasdaq revealed that it intended to purchase the electronic trading network of Instinet Group Inc., a deal that was completed in December. Likewise, in April the NYSE announced the proposed acquisition of Chicago-based electronic market Archipelago; Big Board members and Archipelago shareholders gave their approval last month.
Schwab and Cadence were early participants in Nasdaq’s dual-listing program, launched in January 2004. The program now includes Apache Corp., Hewlett-Packard Co., Walgreen Co., American Financial Group, Chicago Mercantile Exchange Holdings Inc., and the Nuveen Equity Premium Advantage Fund of Nuveen Investments Inc. (though not the company itself).
Bill Porter, the chief financial officer at Cadence, says it was difficult to compare the merits of the NYSE and Nasdaq while his company was dual-listed. One reason for the difficulty, suggests White Cap’s Selway, is a provision under Reg NMS known as “unlisted trading privileges.” UTPs enable other markets to trade NYSE stocks whether they are dual-listed or not — and indeed, for that reason the Big Board maintains that Nasdaq’s dual-listing program has not improved effective spreads, investor choice, or other aspects of market quality for the participating companies.