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U.S. Department of State

Diplomacy in Action

An Update on NYSE Euronext in the U.S. and Global Marketplace

FPC Briefing
Duncan Niederauer
CEO, NYSE Euronext
Foreign Press Center
New York, New York
August 24, 2009


Date: 06/24/2009 Location: New York, New York Description: Duncan Niederauer, CEO, NYSE Euronext, briefing at the NY FPC on "Update on NYSE Euronext in the U.S. and Global Marketplace." © State Dept Image

Moderator: I’d like to welcome everybody here to the New York Foreign Press Center for today’s briefing.

Duncan Niederauer is the Chief Executive Officer of the NYSE Euronext, the world’s most diverse exchange group. He’s also a member of its Board of Directors and its Management Committee. Before joining the NYSE Euronext in April 2007 he was a partner at Goldman Sachs Group, Inc., here in the United States where he held many different positions. He earned an MBA from Emory University and a BA from Colgate University where he currently serves on its Board of Trustees.

Without any further introduction, let me welcome Duncan Niederauer, CEO of NYSE Euronext.

Mr. Niederauer: Hi, everybody. It’s nice to be back here. I think I was here about this time last year. What I thought I’d do while we wait for some of your colleagues to find their way in is I’ll just touch on a few things that we’ve got going on, most of which are outside the United States, I’m happy to report, and then I want to spend most of the time, I’m sure it’s more useful for all of you and it’s more interesting for me too, we’ll spend most of the time on Q&A.

So I’m just going to touch on some of what we’re doing in our various businesses, some of the things that are going on, and then I’ll turn the floor over to all of you guys and hope we have some fun.

First of all in terms of the business. Very focused right now on playing a bit of offense and a bit of defense as well. So clearly it’s incumbent on the world’s exchanges and the competitive environment in which we find ourselves to be operating as efficiently as we can.

So one of the things we’re doing to be more efficient is we have announced recently some fairly aggressive cost reduction programs which we’re well in the middle of and I expect we’ll have some success with during the year.

We’re also I think getting better and better as time goes on at being what I call a professional integrator. You will remember that it was just over two years ago that we announced the NYSE Euronext deal and I think neither company at that time was really as ready as we might have liked to have been to really understand what it meant to integrate two similar sized companies in the exchange business on different sides of the Atlantic. I think we spent a lot of time wrestling with that the first year, and understanding how we were going to live up to the expectations we had created in the marketplace, getting to know each other as companies a little bit, getting to know each other culturally a little bit, and I think we didn’t make as much progress, in all honesty, between April of ’07 and April of ’08 as we would have liked to.

I’m happy to report that I think since that time we’ve made a tremendous amount of progress and I’ll touch on a couple of the highlights later in my remarks. But I think we’re well on the way to really fulfilling the dream that we originally talked about in ’06 and ’07 of what a combined NYSE Euronext might look like.

Since then we’ve also done a number of smaller deals ranging from technology acquisitions like Wombat and Transactuals and Ames and one or two others, and we also acquired the American Stock Exchange along the way as well. That deal had not closed when I was in front of you last spring, and that deal closed in the fourth quarter of last year. To show you that we’re getting a little better at integration, within four or five months of the closing, the efficiencies we had promised had already been produced; we had migrated everyone from the old American Stock Exchange building into our building; and we had realized all the synergies we talked about in very short order, in less time than we in fact anticipated and realizing more synergies than we originally had thought. So I think we’re getting better in that professional integration category as well.

We’ve also been playing quite a bit of offense lately. I think an environment like the one in which we find ourselves, very turbulent environment, I’ll take a risk here and I’ll call it the post-crisis world. I’m not sure we’re in the post-crisis world yet, but if that comes off a little optimistic, hopefully that’s the case, I do think the worst is behind us at least. We are trying to make sure that we as a company very much stay aggressive and take opportunities when and as they present themselves. I just want to give you a few examples of that.

Number one, just last week in fact we announced a fairly unique joint venture between ourselves and DPC where our Futures Exchange in the United States will do a joint venture with DPC. What we hope to achieve when that joint clearinghouse launches in early 2010, is an opportunity to trade fixed income futures on our exchange, and cross-margin them against the cash bonds that DPC settles. So that has not been tried in the U.S. before. If it has been tried, it hasn’t been successful. We think that with the importance that the dealer community now places on capital, the ability by cross-margining the futures against the cash bonds, should free up a lot of capital that these brokers and dealers can put to other uses. So we think that will be quite valuable.

We’ve been making a lot of strides in our listings business. We’ve launched an issuer services business. We realized that while the ICO calendar is starting to warm up, we can’t assume that the recovery is going to have coincident with it a massive recovery in IPOs. We’re happy to report that the CYPOs that have been done, including one from China today and hopefully another one from China this week, have largely been done on the New York Stock Exchange here in the U.S..

We’ve done a couple of repeals. Four of the five tech companies that have come public in the U.S. have chosen VNYSC this year. WE did the spinout of Meade Johnson and, as I said, a couple of Chinese companies in the offing this week -- one today, one later in the week.

So it’s still too early to say that the IPO market is on the road to recovery, but certainly the deals that we’ve seen have been largely done with us and they’ve been I think properly priced, properly sized, and also we felt very successful.

A lot of people say, well, aren’t you encouraging a lot more companies to come to the market? Isn’t that better for the NYSE Euronext Group as more and more companies come to the market? Obviously it is, but I think that would be the wrong advice to give people.

We continue to emphasize quality over quantity right now. We think that the last thing the markets need as fragile as their confidence is, is to have a bunch of companies where the deals are too large, where the price isn’t right, try to be brought to market, and start to not trade very well or fail. I think that would be something we can ill afford right now.

On the international front, we continue to explore opportunities with partners around the world. You will remember that around the time we were with each other last year we were pretty close to announcing a deal to form a partnership in Qatar with the government and with QIA to effectively have the Doha Securities Market reemerge as the Qatar Exchange. I’m happy to report that on my trip through Europe and the Middle East last week we were able to finally close that deal on Friday in Qatar. So that was nothing more than the closing of a deal that we had announced almost a year ago. So that is finally done and I hope that puts us in position to do some other things together. That will start off with us being a minority owner in the exchange and a provider of the matching engine technology and the networking technology for the Qatar Exchange for equities at the start and we hope over time we’ll be in position to go into other products as things develop so we can talk a little bit more about that in Q&A.

We are also months away from being in position to be the technology provider and effectively partner with the Tokyo Stock Exchange on the launch of TDEX, the Tokyo Derivatives Exchange which will be the first single stock options market in Japan. As someone who lived there many year ago for a years, it always struck me that as liquid as the equity market and equity derivatives markets were in Japan, it surprised me that the single stock options market, which in the U.S. has grown exponentially in the last decade, was largely an over-the-counter market in Japan. So this is really the first shot to bring single stock options into a more transparent, regulated environment, and hopefully we’ll have some success there.

Lastly on the international alliances, our BlueNext Group in which we are the majority owner with [Case Depos] as our partner, announced an agreement a week or two ago with the Chinese Beijing Environmental Exchange, so I think there’s a lot of opportunities for us in carbon trading that we’re just beginning to exploit. For us to date this has been very much a European, Central European effort in fact, and I think there are big opportunities in Asia and the U.S. that as things evolve here with various policies and things evolve in Asia similarly, I think there’s a real opportunity for us to participate in carbon trading in a way that right now we’re only scratching the surface on.

A few comments on technology and then I’ll open it up to questions. If you look back to the NYSE Euronext deal, technology was really a big driver of most of the synergies that we have talked about. I think we promised $275 million in savings, and all but $25 million of that is meant to come from IT. So that wasn’t going to happen without converging some of the platforms and making some real tough but important decisions on how we’re going to run our technology.

So firstly, we’ve rolled out the Universal Trading Platform which we call UTP, on all of our European businesses which now makes us as fast or faster than the much smaller upstarts with whom we compete in the region. The team that worked on that effort has now migrated to the U.S. and we will have our U.S. platforms on UTP by late this year or at the latest early next year, so all of our platforms will be on that same platform.

Our commercial technologies business, NYSE Technologies, continues to grow as we expand into the market data business, into the data distribution business, into the networking business. And remember, in places like I just alluded to in Qatar and in Tokyo, we are in fact a commercial deliverer of technology. We will be the operator, we will be the technology provider for exchanges like that. We’ve done that in other places like Brazil, like Malaysia, with more to come.

Lastly, and then I’ll throw it out to questions, we also made another announcement about two hours ago, the press release should just be going out literally as we speak, we have formed a partnership with Juniper Networks, much as we did with Sienna, about a month ago because our most important technology project right now is the building of data centers here in metropolitan. New York. Our data center here will be in suburban New Jersey. And in metropolitan London in a town called Bazleton.

We will have two state of the art data centers coming on line in early 2010 and we have been going through the process of picking technology partners so that the evidence in the marketplace, that this is not just talk about us becoming a cutting edge technology company, but as we rethink what an exchange is going to have to be with a five or ten year view, clearly we’re going to have to be adopting technology as truly a core competency and we’re going to have to understand the important role we’re going to play in connecting the world’s markets so that people can trade anywhere they want any time they want.

So these two data centers probably over time become our two most important hard assets that the company owns. They’re well under construction, I believe will come in on time in the first quarter of ’10, and we’ve selected Sienna, Juniper Networks, and a small company called AboveNet to be providers of various products and services in partnership with us as we go about those data centers. And in each of those cases, we are among the early adopters of the products. Hopefully again, providing evidence to the marketplace that this is not just talk about us embracing technology, and literally becoming a technology company that is in the exchange business, but really evidencing that we truly are on the cutting edge of technology going forward.

With that, Mark, hopefully that’s planted a few seeds and we can go form there.

Press: Martin Wong from China [inaudible] News Agency. I have several questions.

First, some bankers don’t like President Obama’s efforts to talking regulation of Wall Street, saying the initiative will create great uncertainty in the financial markets. What is your response to that, to the Obama initiative?

Second, you mentioned several times about Chinese companies. I know much fewer Chinese companies have been lifted this year. Is it because of the principle of quality over quantity? Or just because of other reasons? Have you taken any measures to lure more Chinese companies? And also can you comment on the [inaudible] of the Chinese [inaudible] on NYSE? Thank you.

Mr. Niederauer: Thank you.

Firstly, on the policies coming out from the Obama administration, I think we try to call them as we see them on each individual one. If we think the administration is doing something we think is sensible, we try to strike a supportive tone. At the same time, if we see the administration doing something we think is a big misguided, we reserve the right to, typically in that instance, on behalf of our various constituencies, who I really speak for. I don’t speak for myself or my company, will make sure we articulate as diplomatically as we can that we may have a difference of opinion on certain issues.

I can give you one example of both, and it strikes at the heart of your question.

I think the initial reactions we’ve seen to the overall direction of the regulatory landscape of the administration appears to want to go, I’m actually quite supportive of. I think that you may get some reactions from some in the community that say it’s going to hurt innovation, it’s going to stifle creativity in the financial services market. The fact of the matter is, we’ve had a largely self-regulated financial services industry in this country for a long time that’s just going to have to put up with some re-regulation.

I thought the ideas of reg reform that the administration put out recently were directionally correct. The devil’s always in the details, but it didn’t concern me nearly as much as it seemed to concern others. My view is we should be all playing a role in trying to figure out what the new regulatory regime and framework should look like, not whining that it’s too much or too little or not right. So I think you're going to see us continue to be supportive there, but I emphasize again, the details are going to be critically important to work out as it is in anything like that. I thought directionally off to a good start.

As far as your question on China, I think it does have a lot to do with quality versus quantity. I don’t think it’s a good idea for a bunch of companies to come to market right now, Chinese or any other.

On my last trip to China which was just a month or so ago when I was there I spent a day in Beijing and then two days in Shanghai as a member of the International Financial Advisory Committee and to go to the Financial Forum in Shanghai.

It’s clear to me there’s plenty of companies there in the pipeline that would like to list in places like the United States or China, and I think it’s incumbent on both us and the Chinese authorities to think about letting them out thoughtfully and slowly. This is not anything we should be rushing to do.

I’m pleased to see the Chinese capital markets reopening again. I think it is important that as the market tone is better we need to at least test the waters to find out how things will go, so I’m optimistic that these two companies that have come to market this week will not be the last we’ll see here, and the one today actually went quite well.

These companies have gone up and down with the forces of China. I’m not here to tell you that the ones that have listed on the NYSE have done remarkably better than the ones that have only listed in Shanghai. But I think there is a good opportunity for Chinese companies with global ambitions and not only for their business but also for their shareholder base, that I think listing here affords them a very good opportunity that I think is a long term process.

Press: German Press agency, DPA.

I’ve got a question regarding the international field. You were talking about playing often. But you didn’t mention quite quite [inaudible] [Deutchevelder] which is the main competitor, and they’ll from time to time, there are ongoing speculations about a merger or talk. What’s your strategy with the [inaudible] Börse? Are there any talks right now or were there any talks about a merger and is a merger still possible?

Mr. Niederauer: In our industry it’s clearly going to be further consolidation, so I think we all have to be in communication with each other all the time. I wouldn’t describe all of those situations as having talks about a merger, but the competitive landscape is shifting. There’s clearly going to be more consolidation. I think what’s happening in the U.S. and Europe now is the companies in the industry are trying to digest what they’ve already done and decide whether additional M&A activity is going to derive any additional value for shareholders, and I think those conclusions are at best unclear.

I think also if you listen, I just touched on a few of the initiatives we worked on on our own. There are many many more tings that we’re working on and I think a lot of us are very internally focused to make sure we’ve got our business where it should be.

Do I think there are opportunities to do consolidation down the road? Sure. I think a merger between ourselves and Deutsche Börse, given the relative size of the two companies, I think is quite challenging. As you probably know, the [market camp] of Deutsche Börse is more than twice ours, and I think that would make merging actually quite difficult. So no, there are no talks going on at this time.

Press: [Inaudible] Business Daily.

You comment a post crisis world. I was just wondering why you think that. We’ve got lots of news coming in still, a lot of people fear the inflation.

Mr. Niederauer: I will say this, and I knew I’d get a few questions about that. I do feel that we have come through the worst of it already and I think there are signs in many places, not just the U.S. but many other places that I’ve traveled, where you get the sense that things are bottoming if not modestly improving. I don’t think we should all be calling this a recovery yet. At the same time I have had a frustration with a number in the media, present company excluded, I’m sure, that every time we see a potential positive sign that might suggest we’re on the road to recovery, I think the media is too quick to say yes, but it will be easily derailed by this, this or this. Some of that may be true, some of that may not be true, but I do feel that if we’re going to start to rebuild trust and rebuild confidence when we do start to see some signs that are positive we should report them as such. We should talk about them and such. And realize we still have a lot of work to do, but I certainly think the worst of it is already behind us.

I think you're beginning to see signs in the U.S. that the government’s packages are starting to bear some fruit. It was very visible to me in China on my last trip a month ago, that that spending is I think being very intelligently targeted and signs were visible everywhere you looked that it was making a difference.

So all I’m saying is we’re certainly not out of it but I think we’ve come a long way and I do think the worst is behind us.

Press: [Inaudible] German Financial Daily [inaudible].

I have two questions. First, you were mentioning the [inaudible] change and that you would like to expand [inaudible]. If you could elaborate on which products are possible. And secondly, I would be interested in your opinion, if you have a model yet for clearing [inaudible] joint venture with the PPC. Is there a timeframe [inaudible] revenue after all [inaudible] administration wants to have a clear and open exchange and have [inaudible] to offer the [inaudible].

Mr. Niederauer: First of all on Qatar, as I said in my remarks, for the foreseeable future we’re just going to focus on equities. I think that if the environment were different we would be doing derivatives sooner. I think we’re going to all take that under advisement and just let the dust settle from the crisis. It is something we will be working together on to reflect on what the next product would be. I would imagine we certainly go into options, we could certainly go into commodities, we could certainly go into indexed futures. I think all of those things are on the table but none of them are near term decisions. So we’ve just formed a company. We’re going to start by delivering world class technology.

As a side note, the Qatar Exchange will be the first exchange outside of those that are fully owned by NYSE Euronext that will run our Universal Trading Platform technology. So that will be the first distribution of that product outside of the walls of the company so we’re pretty excited about that.

On the clearing side, it should be evident to all of us that clearing in general is being increasingly viewed as a strategic asset by governments around the world and a strategic part of financial infrastructure and it’s being equally viewed as of strategic important to all the companies certainly in our industry.

As far as the CDS efforts go, there are four major derivative exchanges around the world and we are the only one of the four that does not own their own clearinghouse. So we have an arrangement with the London clearinghouse, but unlike our three competitors, we do not own it. It has become apparent to me that at least in the credit to [inaudible] space, not owning a clearinghouse is a big limiting factor. I think the exchanges that own their own clearinghouse will be the ones who get the CDS business. So until we solve that problem I don’t think we’re actually in a position to be able to participate meaningfully there.

To shift gears a little bit for the DCC initiative, that is not for credit to [Falzlas]. I suppose it could be down the road. Its first objective is going to be for us to trade financial futures, list the financial futures on our Futures Exchange in the U.S., and be able to have those clear in the same place that the offsetting U.S. cash bond positions clear. We think, as I said earlier, the ability to cross-margin those two products which no one can really do right now, will free up a lot of capital that is right now posted as margin on derivate exchanges and at DCC. I think that’s going to be a pretty positive thing. If that works, there are other products, be they listed or OTC that we can then clear in that clearinghouse and I think that jointly owned clearinghouse gives us as a company the best opportunity to participate in those OTC derivative businesses, a much better position than the one in which we find ourselves today not owning a clearinghouse.

Press: Agency French Press, AFP.

You talk about you’re very cautious about [inaudible], but on the trading side do you see signs that we’re back to normal? For example, the [inaudible] put some rules to [inaudible] listing which are supposed to end at the end of the month I think, so do you think you will need to extend those new rules or what’s happening right now?

Mr. Niederauer: Certainly if you followed my comments for the first six months of the year, I’ve really been, I could be described as having been optimistic when everyone was pessimistic; cautious when everyone was getting optimistic; and now I’m somewhere in the middle. So in February I thought everyone was too negative. And I thought that the market was trading lower but I thought that people were, everyone you talk to is pessimistic so I thought it was time to strike a few optimistic cords. Then of course we had a big rally in March and everyone started thinking of me as an investment strategist, which I would remind all of you I am not. And then everyone came and said well, that’s great, the market’s just rallied, doesn’t everyone feel better now? And my view was when the world’s largest capital market goes up 20 percent in less than three weeks, that shouldn’t induce a lot of confidence either. It’s too much too soon.

So my point in early April was it’s nice that we’ve rallied. I think we haven’t seen enough volume. Let’s pay very close attention for the next few months and see how things go.

I’m happy to report that trading has stabilized and the market has stabilized quite a bit, right? We’ve lived through April, May and June where with not a lot of IPO activity, but a tremendous amount of secondary issuance. A lot of companies, particularly in the real estate and financial services sectors have done very sizeable secondary offerings that never get as much attention as IPOs do, and the market absorbed all of that and is basically trading slightly above the levels that it was in early April. So I think you can argue that April, May, June has been a pretty good pattern of activity that should at least give us confidence that things are stabilizing. Volatility is lower, the market is steady, the volumes have been okay, not too high but not too low either. So I think things are, the tone generally feels a lot better.

I think we did, as the question points to, provide more flexibility to our listed companies so that companies who have listed with us for a long time didn’t suddenly get swept up in a very volatile environment and suddenly lose their privileges to be listed. We said when we did that we were going to take it under advisement and be flexible. It was not meant to be permanent. I would imagine we’ll extend it a little longer, but it definitely will not be a permanent change. I just want to be comfortable that most of the companies we were worried about are now in the safety zone and once we get to that point I would imagine we’ll go back to our pre-existing rule set.

Press: People’s Daily. I have three questions.

The first concerns you mentioned cost reduction measures underway. Could you elaborate on the core measures to reduce the cost?

The second question is, it’s been more than a year since NYSE has teamed up with Euronext. To what extent do you think the requirements for listing have unified in these two physical areas?

And do you foresee a preference on the part of Chinese companies to get listed in the States rather than in Europe?

The last question is, you mentioned that the Chinese Beijing Environmental Exchange, could you elaborate on that subject? Thank you.

Mr. Niederauer: First of all on the cost reductions, what we announced on our last earnings call was that given the continuing competitive pressures and the importance for us to operate our business more leanly, on top of the guidance we’d already given to slightly lower costs in 2009, we took that guidance down by another $100 million.

To put that in context, that was $100 million on a base of roughly $1.7 billion, so we were talking about another five or six percent reduction. I would have to call that incremental more than transformational. And I thought that the environment in which we were operating now not only made it necessary but also gave us the opportunity to tighten our belts further like a lot of other companies were having to do right now. Those reductions will come from everything ranging from being more efficient in how we do things, thinking about using video conferences instead of traveling. Thinking about more compensation in long term stock instead of cash. Thinking about overall head count in the company and where do we really need people and how can we operate more efficiently, how can we combine groups where they might not have been combined before. I think the companies suffered a little bit from operating in a very different regulatory environment, a very different competitive environment, and one in which true, the normal things you would do in a merger had not all been executed. So a lot of this this year is just about getting all of those things done. So it’s not going to come from any one place, but I think we’re fairly confident that we’re going to succeed in delivering on the promises that we made to the analysts and shareholder communities.

You said we’ve been together with Euronext for a little more than a year. As hard it may be to believe, it’s a little more than two years already. So the merger was consummated in April of 2007, which I remember vividly because it was actually my first day at the NYSE, was when the merger was closing and they were having all the fanfare. And I think we’ve made a lot of progress, as I mentioned, in my remarks, in the second year, much more than we made in the first year.

There have not been as much demand as we all would have guessed for companies to be dual listed on both sides of the Atlantic. Which segues to your other question, the strong preference from the Chinese companies to date has been to list in America because we give them all a choice. You can list in the U.S. or Europe or both. Primarily it’s been the U.S. so far. I think they view it as a deeper capital market, as an opportunity, as I said earlier, to expand the client base and the investor base and that seems to be their choice to date so far when we give them the two choices.

We’re going to continue to try to converge the listing standards, and they approach NYSE and Euronext, and more sensibly go after international companies, but I think this idea that a lot of companies are going to feel compelled to list in the U.S. and Europe has not proven to be true yet. Those that are I think are quite happy with it. AT the same time it only makes sense if you’re going to have meaningful liquidity in the U.S. and Europe if you really, all your liquidity and your stock is trading in the U.S. or Europe it doesn’t make sense to be listed in both places, I would say.

Lastly on the Environmental Exchange in China, our [BlueNext] platform has quietly become probably the leader in spot trading of carbon credits. As I also stated in my remarks, the problem for us is that success hasn’t migrated to Asia or to the United States. It’s very Euro-centric so far.

So we’re exploring opportunities here in the U.S. and the arrangement with the Beijing Environmental Exchange is really just to get started. It’s a little more than an MOU and we’ve agreed to share what we’ve learned about our business and what they’ve learned about these types of efforts in China and see if there are things we can do together, possibly cross-market together. So I think it’s a lot meatier than an MOU, but it’s all of two weeks old and I think it’s too early to tell yet.

Hopefully UI got all your questions in.

Press: Louis [inaudible], I’m from the daily newspaper in Denmark.

You mentioned that you see opportunity for further consolidation, so I’m curious as to where that might be. Where do you see the opportunity? And specifically in Europe, if not Deutsche Börse then where? Thank you.

Mr. Niederauer: I think it’s going to sound like I’m hedging a bit. In an industry like ours there’s always going to be more consolidation. It is a scale business. It’s all about building technology and putting more and more products on the platform.

I’ll go back to what I said earlier, there’s already been a lot of consolidation in the U.S. and Europe. I think everyone who’s in the business and has been the consolidator so far in U.S. and Europe, whether that’s us, the CME, Deutsche Börse, LSE. NASDAQ. All those exchanges so far have been consolidators. They have not been consolidated. I think what we’re all trying to figure out is should we all be looking in other parts of the world like the Middle East, Eastern Europe, Latin America, Africa and Asia? Or is there more to do in the U.S. and Europe?

For now I’m of the opinion that there’s not that much more to do in the U.S. and Europe. We should be focusing our attention in other places, keeping in mind that those other places probably are a few years out on the horizon for anything meaningful. Could we do a few more transactions like we did with Qatar? Sure. You’ll notice we’re a 20 percent owner of the exchange, we didn’t buy the exchange. Right? So I think that kind of consolidation that we all witnessed in the space to date, that’s a little out in the future right now. I personally don’t think you're going to see a lot of activity, but we still explore all opportunities when they present themselves.

Press: Maria [inaudible], [inaudible].

Does your cost reduction translate saying that lower cost for investors, form trading?

If that is an answer also for the increasing competition from [inaudible] exchange like the ones mentioned on today’s Bloomberg story about the New York Stock Exchange losing share in the trading in the U.S..

What’s the difference from a foreign view? Are investors protected in the same way? Whether you use alternative exchanges or the [inaudible] stock exchange.

Mr. Niederauer: All good questions. First of all on the con side, part of the reason why I feel we have to reduce costs is because we clearly have to reduce some of our revenues here, Right? To compete we’re going to have to offer lower prices, and we already have. We’ve reduced prices already this year once or twice in Europe. We’ve got to provide services at lower prices on transactions as well as clearing and that’s a fact of just having to compete in the environment.

To do that, we’ve got to obviously run a leaner organization if we’re going to be able to stay ahead of the competition.

As far as the story in Bloomberg today, I just confess, I was a little disappointed in that one because for the last two or three months we’ve actually finished upgrading the technology, we’ve held our own in terms of market structure. I think three months ago we were at 40 percent and now we’re at 39 percent. I actually think it’s quite stabilized, and some of the people with whom we compete could not make that same argument. Their market share has actually dropped precipitously in the last three or four months. So I was disappointed, and I guess it’s a blessing and a curse, [inaudible] in the NYSE. Everyone always wants to talk a out us.

We’ve actually held our own on market share in the U.S.. It’s a very competitive environment. WE have reduced our fees. WE have reduced our costs. And I think we’re fighting very had and pretty successful in the U.S. right now. So I’m pretty comfortable with where we’re standing.

I do think that what regulators on both sides of the Atlantic are going to look at is in the U.S., roughly a third of the volume is done by unregulated, relatively opaque market places, and in Europe that number is probably more like 20 percent. I think the regulators on both sides of the Atlantic areas saying we know we’ve created competition. Everyone would agree competition is a good thing. Now that we can see how that competition has manifested itself, is there anything we could or should be doing about it.

We get a lot of questions form investors saying if you just learned that regulation was important, transparency was important, and accountability was important, then why do most of the venues in the United States have none of the above. And they were created because of an environment that wan ted to create competition. I do think it is time to review where it’s left us. We should be thinking, in my opinion, about how to level the playing field between the people who certainly desrve the right to compete; and we equally deserve the right to compete. So we can’t be over-burdened either when a lot of the competition doesn’t share a lot of the responsibilities that we share. Hopefully that answers your question.

I can take one more, then I’ve got to get going, I apologize.

Press: One very general question. What do you think the SEC or [inaudible], what do you think the U.S. should learn from the financial crisis?

Mr. Niederauer: That’s a loaded question.

I think there’s a bunch of learning opportunities in this as there is in any crisis. The first thing I think we should learn is personally, we should all stop acting surprised when this happens in this country. Many of you have heard, if you’ve read some of my public remarks before this is not the first time I’ve said this.

If you think about some of the attributes of the U.S., we’re a country that believes in a free market. We have a largely self-regulated financial services industry. That’s not a secret to anybody. We know it’s self regulated. And we have a regulatory construct that we also know and it’s had difficulty keeping up with the pace of innovation in that largely self-regulated industry.

So whether we want to act surprised or not, history tells us that that combination ignites every eight to ten years. You can go back into the early 20th Century if you’re like to check me. I think it’s pretty close.

Every eight to ten years there’s some sort of a crisis of an asset bubble or a banking crisis, whatever it might be.

To me, that’s not surprising, yet we act like it is every time this comes up.

So the first lesson I think we could learn is to understand that’s what we signed up for and unless we plan on changing any of those things, expect that it will continue to happen, at least that frequently.

Press: I certainly wouldn’t vote for changing the free market approach. I do think the financial services industry is in line for some reregulation. But boy, I hope it’s not over-regulation because I think the second thing we need to learn is resist the temptation to overreact. We have to tale a very very long term view on how we’re going to rebuild confidence, how we’re going to rebuild stress, and how we’re going to regulate the financial services industry. I think to do that hastily, to do it impetuously, I think, and do it impatiently, I think is dangerous.

We also learned that while the crisis requires some reregulation, let’s look around first and say boy, the regulated transparent markets did work pretty well. Maybe we should apply existing regulation more broadly or more intelligently before we run around and say we need all new regulation.

So those are a couple of things that I hope we learn, and there’s probably a bunch of other things if you gave me more time, but I think those are two things that come immediately to mind.

Thank you very much, everybody. I appreciate it. Thank you very much.