Seeing Double
Six New York Stock Exchange firms also plan to list their stocks on Nasdaq
The venerable New York Stock Exchange has prevailed time and again over the Nasdaq, a rival exchange whose recent history mirrored the rise and fall of the Internet economy. But a move last week by six NYSE-listed firms suggests the battle is far from over. Apache, Cadence Design Systems, Charles Schwab, Countrywide Financial, Hewlett-Packard, and Walgreens became the first NYSE companies to join a Nasdaq program under which the stocks will be listed on both exchanges with the same ticker symbols. "For the first time, some major NYSE companies are acknowledging that the Nasdaq even exists," says Matt Andresen, head of global trading for Sanford C. Bernstein. "It's an enormous departure."
While dual listing will have little immediate effect on trading, the announcement is considered a powerful statement to the Big Board, which has been under attack for being a technological laggard. The NYSE operates a floor-based, open-cry system with traders called specialists. The smaller Nasdaq operates electronically, with a network of computers connecting buyers and sellers. Both exchanges have taken their share of recent blows. The collapse of the Internet bubble eliminated many Nasdaq-listed companies. Increased competition from newer electronic trading systems has slashed its trading revenue, and since 1999, 118 companies have jumped ship from Nasdaq to the Big Board. The NYSE, meanwhile, recently revamped its board and replaced CEO Richard Grasso after his $188 million pay package became public. Former Goldman Sachs executive John Thain began his new job as CEO of the NYSE last week. The regulatory structure of the exchange has faced sharp criticism, and it is being sued by the powerful California Public Employees' Retirement System, or CalPERS, for allegedly defrauding investors.
Competition. An NYSE spokesman downplayed the Nasdaq move, but many institutional investors, including Fidelity, applaud the Nasdaq's efforts. "The main reason the NYSE developed its bad behavior is that it's effectively a monopoly," says Sarah Teslik, executive director of the Council of Institutional Investors, which represents large pensions.
Nasdaq officials hope the program will encourage more competition among the exchanges, and they continue to court more listings. "Too many companies make their listing decisions as if it's a branding decision," says Nasdaq's CEO, Robert Greifeld. "Brand has to be secondary to performance." The exchange has waived listing fees for firms during the program's first year.
This story appears in the January 26, 2004 print edition of U.S. News & World Report.