A long time ago, a young girl named Juliet asked Romeo, “What’s in a name?” Unfortunately, Juliet learned that the wrong name could mean death.
Ever since Deutsche Borse announced its intention to merge with NYSE Euronext, parent of the New York Stock Exchange, there has been a lot of speculation about what the name of the combined entity will be. Because the Germans will own 60 percent, will the name be something like Deutsche NYSE? Or will the Germans acquiesce and give NYSE top billing as New York’s U.S. senator Charles Schumer insists? Unlike in Juliet’s day, no matter how harsh the rhetoric, the a “wrong” name is not likely to result in anybody’s death. I have to wonder if all the fuss about this merger and what the final name might be is really Much Ado About Nothing.
The New York Stock Exchange was famously founded in 1792 with an agreement signed under a buttonwood tree on Wall Street. Over the next two centuries, New York City grew to become the world’s financial capital and the NYSE became the world’s most important stock exchange. Today, daily trading volume averages almost 1.5 billion shares and NYSE Euronext has a market capitalization of nearly $10 billion.
But despite the critical role the NYSE has played in New York’s (and America’s) history, the fact is that it no longer enjoys the stature it once had. This is because electronic trading has been making stock- exchange trading floors, as we have known them, largely irrelevant. Less than half of all stock trading takes place at a physical exchange. The ranks of all those men and women known as specialists and floor brokers have been thinning at the NYSE for years. In an age when nothing lasts for long, let alone forever, computers, which automatically execute trades more quickly and efficiently than human beings can, are putting an end to physical stock exchanges. There is a good chance that in the not too distant future, the NYSE trading floor at 11 Wall Street will be nothing but a museum.
So how much should we worry about the Germans taking over one of America’s most hallowed institutions? I say not much. Let the Germans buy the NYSE, and let them call it what they will. As long as investors can execute their trades rapidly, efficiently, and with minimum costs, they won’t even notice the change in ownership. And as long as investors are making money, an exchange with any other name (dare I say it?) would smell just as sweet!
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