4:00 P.M., EDT
MODERATOR: Good afternoon and welcome to the Foreign Press Center. Today, we're very pleased to have with us as our guest Mr. Duncan Niederauer. He's the CEO of NYSE Euronext and he's going to come up and give a few opening remarks and then take your questions. We have 45 minutes and we'll get started. So with that, Mr. Niederauer, thank you.
MR. NIEDERAUER: Thank you. Thanks for coming, everybody. What I'll -- what I thought I'd do is, since I'm more eager to hear your questions today, I thought I'd just give you a quick update on what the company's all about, what we're doing. Because it might be quite different than what many of you have grown up thinking about. When you think of the NYSE, obviously, over a 200-year-old company, I think everyone around the world -- I can tell in my travels, it's a name that everybody knows. And when I ask people what do they think the NYSE is, a lot of them think it's very different than it actually is today.
While we're 216 years old, coming up this month, we've only been public for a little more than two years. So in some respects, I've referred to it in other meetings like this, as a 216-year-old startup. Most companies don't wait 213 years or 214 years to go public. You know, they obviously go public long before that. So we've only been a public company for a little more than a couple of years, as we come up on our 217th birthday. And I think a lot of people also think of the NYSE as that trading floor that you see every day on TV around the world. That's kind of the shot that all the financial news networks around the world would show when they're talking about the U.S. capital markets. And so when people think of us, they think a large part of our business actually takes place on that floor.
Yet, what we've embarked on the last two or three years is really to not only become a public company, but a much more diversified company, a much more globally diversified company as well and not just product-wise. And we've really set about expanding our products' footprint and our geographic footprint, and you'd be surprised that -- to hear, I think, that a very small percentage of the companies' revenues actually come from that trading floor that you see on television every day.
We actually, at the current time, make more money in the company outside of the United States than we do inside of the United States. And I think we're fast on our way, over the next three to five years, to becoming a technology company more than a financial services company. I think it's merely a coincidence that we traffic in financial services instruments. Certainly, our largest customers are the financial services intermediaries. At the same time, you know, I think it's really all about building scalable technology and thinking about how many products we can put on that technology platform and in how many regions we can put them.
So given that the business is really changing quite dramatically to one that is more of a global business, you can then imagine that a good percentage of my time is spent outside of the United States. Most recently, in the last four or five weeks, I've been in India, Malaysia, Singapore, China and Japan. And coming up in May, I'll be in London and Northern Ireland next week, and I'll be in the Ukraine and Russia later in the month, with a trip to Paris kind of sneaked in between.
So many of our clients are not in the United States, many of our businesses are managed outside of the United States. Many of the officials that we need to know around the world are obviously, you know, not all people that are just visiting the U.S. I've got to go see them. So on a lot of these trips, particularly the ones I've done to Asia recently, a lot of it has been to see companies that might be listed with us on either Euronext or NYSE, prospect companies that we might hope list with us some day, government officials and exchange officials in each of those countries I just mentioned. Because in many of those places we have potential things we could be working on together.
So to give some illustrations of that recently, in the last two weeks we've announced commercial technology arrangements with Malaysia and the Philippines, where we'll be helping them with their exchange technology. And on the back of an agreement that was signed between the Tokyo Stock Exchange and the New York Stock Exchange a couple of years ago, I met with their management team when I was in Japan last week and Saito-San and I agreed that we would announce on Monday, this week, as we did, a collaboration to build a single-stock option business in Tokyo, which as someone who used to live in Japan and traded there, I thought was long overdue. So I think part of these trips are for commercial reasons, but a lot of it is for relationship building, foundation laying with the government officials, our customers, exchange officials, et cetera, et cetera.
So I think when you think of our industry, what's happened at the NYSE is not unlike what's happened at other exchanges. You need to go back no further than eight or ten years ago, and all of the exchanges in the world were -- I think you would have called them typically highly regulated, generally monopolistic, public utilities. They were almost viewed as governmental or national assets. I think what's happened in the ten short years since then, is the majority of exchanges around the world, with a few exceptions, have demutualized and changed their stripes from a member-owned organization to a demutualized organization. They've become a public company. They've become a for-profit company, and I think that's true in most of the major markets in the world. And where it isn't, those exchanges have embarked on a similar process that many of us have already been through.
At the same time, if you look at our recent history, four of the last five acquisitions that we've done, because we are in a consolidating industry, have not been with other exchanges. Outside of the American Stock Exchange acquisition, which we hope to complete some time this summer, the last four other acquisitions we've done -- excuse me -- are technology acquisitions. We bought a small software company in Northern Ireland. We insourced our technology that we use to run our exchange in Europe by buying back our 50 percent ownership stake in (inaudible) with a small French company. We created a networking business in the United States on back of our safety network. And we bought a small gateway company, fixed gateway company -- connectivity company -- called TransactTools. So part of what we're trying to do is really change our business model. And then at the same, we try to tell our story so that people understand what it means to be an exchange now and how the business model is changing.
So, I'm going to stop there because I want to leave plenty of time for questions. And I've got -- it looks like a little more than 30 minutes. So feel free and I'll try to be as judicious as I can and recognizing who's first and all that.
Sir, why don't we start with you.
MODERATOR: Please wait for a microphone, and identify yourself.
QUESTION: Thank you. Lennart Pehrson, I'm with the Swedish newspaper Dagens Nyheter. Referring to what you said about being more of a technology company, where do you see your main competition coming from now? Is it mostly traditional exchanges or newer kind of trading places that don't have that tradition? And more specifically, can you give your views on the NASDAQ OMX deal? What does that mean for NASDAQ's global competitiveness? Does it make NASDAQ a more difficult competitor for you?
MR. NIEDERAUER: I've never heard of NASDAQ -- who's NASDAQ OMX. I don't know who they are. Yeah, first of all, on the technology question, a lot of what -- there's two elements to our technology strategy. A lot of what we're doing now is taking the technology that we've built to run our exchanges and rolling that out to smaller exchanges and offering that to smaller exchanges around the world, who, we believe, are going to face the same challenges we have in terms of latency and capacity. So that's a big business for us and it's a reasonably good-sized business for OMX as well. So really for that, in that space there are a couple of other exchanges that try to be a purveyor of technology, but really it's just the two of us that have had any meaningful penetration in terms of -- into the world's smaller markets.
The second part of being a technology company is thinking about what your value proposition to your customer is. It used to be that the customers got themselves organized, they had all the tools in their own shop, and they took care of what orders they wanted to place, how they wanted to place them, where they wanted to send them. And then all you really had to do as an exchange was just be the primary place where that stock was traded and the business found its way to you.
Now, with clients having more and more technology demands as volume has grown, some of those technology acquisitions I referred to are really acquisitions that position us to be more helpful to the customer as well. So we can be part of their order management infrastructure. We can be part of their routing infrastructure. We can be part of their network infrastructure. We can be part of their compliance infrastructure. And where needed, we think we can provide a lot of the guts that helps them get ready to send their orders where they need to send them.
At the same time, the Wombat acquisition in Northern Ireland was all about data distribution. As you've seen everything get faster, and you've seen a lot of new entrance in the marketplace, message traffic has grown exponentially while volume growth has been pretty strong, but not nearly as exponential as message traffic. So behind the Wombat acquisition was we were hearing from a lot of clients that their data distribution channels weren't working efficiently. They wanted help with all the market data that was coming at them, so that's another big part of the technology element. And I think we don't see any other exchange to play in that strategy yet, but we would expect others might.
If there's a third piece to it, to the gentleman's other question, what has changed really only significantly in the U.S. but is beginning to change in Europe, is you're seeing new entrance in the exchange space that basically run fully electronic exchanges. They're typically very small operations, not a lot of bells and whistles. It's kind of a like a no-frills airline. And they build their model around being really, really fast, and the average trade size on these tends to be very, very small. But that's another element to it. And the landscape is constantly shifting there. There's probably 25, 30, 35 places in the United States where you can now trade equities. There's fewer than that in Europe, but I think you see competition beginning to come. So I think we expect over time some of that competition to come from those types of arenas.
And it's an incumbent on us to make sure that our technology runs really, really quickly. You know, we've got to be as fast as they are, yet we have a lot more standards to maintain than they probably do.
Yes, sir, in the back there.
QUESTION: Nikola Krastev of Radio Free Europe. Considering your interest in further acquisitions, can you tell us do you plan or at least do you anticipate to continue with those acquisitions in your markets in Europe, Central Europe, Eastern Europe, countries like Poland, Czech Republic, Hungary, now Romania, Bulgaria, also they're part of the European Union? Something which is also related, most of the companies which are listed on those stock exchanges are companies under half a billion dollars, which is probably pretty small by the standards of New York Stock Exchange here in (inaudible), so is there any advantage for those companies to do this or not so? Your view, thank you.
MR. NIEDERAUER: Thank you. All right, so two really different questions. The first one is: We're in a consolidating industry, so there's no doubt that we have to keep our eyes open all the time. I think the pace of that consolidation is going to slow down, given the markets that we're in right now. But we have to keep our eyes open because we're obliged to our shareholders to say, we're always looking, because we will be a consolidator in this space so we're obliged to make sure we're always aware.
I've said this many times before, I think if the last two or three years for the company were -- would be looked upon as the time when the company expanded dramatically both product-wise and geographically. I think the next two or three years are going to be more about us integrating the pieces that we've already bought. We've been pretty busy for a company that's only been public for two years: two or three pretty significant acquisitions, a merger, and then a number of smaller built-on acquisitions. At some point, you have to catch your breath and make sure that you're integrating these into one company because that's part of where you get the -- that's part of where you get the magic from and that's part of what you promised to the shareholders. So we'll always keep our eyes open. The regions that you're talking about are certainly of interest to us, but nothing's imminent. And I think it's more about integration right now than further acquisition.
On the second question, I'm glad you raised it because that's part of the message that we're also trying to get out. When people think of NYSE, they think of a place where you go to list when you're already well established. They don't think of it as a place for younger companies, for emerging companies to go. And what we've worked hard in working with Euronext to accomplish is we really now have a -- what I would call not only a global listing brand, but one that is very suitable to companies of all shapes and sizes. So in the U.S., we have the NYSE brand and the NYSE archebrand. And in the - Europe, we have the Euronext brand and the Alternext brand. While the standards of all of those are higher than AIM and, in many cases, higher than NASDAQ, we still feel that we're no longer a one-size-has-to-fit-all exchange; that you can be an emerging company and you can find a way to get under our brand umbrella and be part of our family of listed companies.
Frankly, we weren't really sure that was going to work because the brand had been so successfully communicated as one for established companies, but we felt compelled to try it. And I'm happy to report that 2007 was the first year that when we look at technology companies, which were historically synonymous with emerging companies and NASDAQ's real - the key to their brand success, more money was raised from IPOs of tech companies in the U.S. that listed on the NYSE than on NASDAQ last year for the first time. So I think that pendulum is swinging and we're trying to do a very good job of saying: Your listing decision is a global decision; we can be very effective for you, even if you're a smaller company.
We want to have today's great companies and tomorrow's great companies and that's what we're trying to do right now. We think we're the gold standard. We think there's no question about that and no one quarrels with that. It's about us getting the message out. And part of what I do when I go to these other regions is I meet with the 45 Chinese companies that are already listed on the NYSE. I even talked last week in China about us potentially listing our own company in Shanghai because we get questions from many of our U.S. companies saying, this listing decision, it's global and it's a co-branding decision. Can you help us figure out where else we should list our own company? So I think you're going to see more and more of that taking place and I think we're extremely well positioned as long as we get the message out properly. Thank you for the question.
This young lady here.
QUESTION: My name is Yanchun Yang. I work with the Economic Daily of China. I have basically two questions. The first is that it seems that the new strategy of change of business model by being technology driven has been formed and is well thought of. It's -- by our understanding, I'm wondering if I can - start it in this way. Is this a strategy to avoid the (inaudible) because of the volatility of the market? It's - and if it is, what is the prospect, in your view, in the coming years, especially when the U.S. economy has a recession or relatively slow growth?
And second - the second part question is about Asia as well as the China market. I mean, given the close synchronization of the European market with the U.S. markets, it seems that it happened in the past that Japan does not go very accurately in the same pace. So it is with China. And last year, your colleague, I mean, John Thain, actually defined that Japan is a relatively mature market. So the strategy - collaboration strategy with Japan is fairly different from that with China. And I want to know your comment today, if there was any change of the - I mean, situation or how do you define that? Thank you.
MR. NEIDERAUER: Okay. I think I got that, so I'll do my best. First, on the business model, the change in strategy has been a conscious decision and it's more about -- I think the more important part of it is expanding the geographic footprint and the product footprint than necessarily the tagline that we're becoming a technology company. Sure, it's great to have some of our revenues come from more predictable kind of recurring sources that you get in technology businesses where a lot of it is licensing or recurring revenues for selling your technology to other places. But the most important part of it from our point of view is if we can diversify geographically and diversify our product mix, then I think we've positioned the company to be much stronger and to be much more easily able to flourish through periods like we're going through right now.
I don't think it's a novel strategy. I think a lot of - it mimics really what a lot of companies have done. The economy has gotten more global. The markets have gotten more global. And one of the questions I get to ask in my role a lot is CEOs from different companies come through our doors every day. They run all different kinds of businesses, high-tech businesses, manufacturing businesses, industrial businesses. And the one question I ask all of them, particularly now with the economy slowing down is: How is your business doing? And the overwhelming majority of them who say their business is doing well, have done exactly what we're in the process of doing, which is they've diversified their exposure. They're not completely immune to a slowdown in the U.S., but they're much less adversely impacted by a slowdown in the U.S. than they would have been five or ten years ago. Many of them will come in and tell me, 60 or 70 percent of my business comes from overseas. A lot of that's from Asia. While it's possible to envision that those markets might slow down, too, they're certainly not now. There's plenty of demand from those parts of the world and those companies are quite successful, well, you know, at doing that. And I think we're trying to do the same thing.
In terms of our strategy of how would we approach the strategy in mature markets, versus emerging markets, it's a very good question because I think the approach you have to take is quite different. In a place like China where the Shanghai Stock Exchange has been around for 15 years, our belief is that China will be an incredibly important partner of ours in the long run.
And in the medium term, it's important for us to display what we think being a partner means and doing our part to contribute to that partnership. I don't think there's anything transformational to do in a place like that, any time soon. It's about building relationships and working together, whether it's about market structure or technology or, as I said earlier, helping each other find ways for both of our countries' companies to succeed in access to capital markets they want to access. So that's a strategy that you might deploy in a lot of emerging countries.
I think in some of the more mature markets, you would look at what we did in a place like with Euronext, where you would argue those markets were already fairly well developed, that more naturally lent itself to a consolidation transformational merger. Is it possible that something like that could happen in a place like Japan? I would suppose so, eventually. But right now Japan hasn't even gone through the demutualization process. And I would think before they can really take any part in that, they would have to take some of the steps some of the other world's markets have taken. So hopefully that answers your questions.
This young lady here was next, I think. I'm not very good at this presidential press conference.
QUESTION: Indira Kannan from CNBC India.
MR. NEIDERAUER: Yeah.
QUESTION: I have a couple of questions. One is, you know, there's a lot of concern among the Indian IT sector about U.S. tech spending, especially given the current economic situation here in the U.S. What is the NYSE's own outlook for tech spending this year and especially directed towards Indian IT companies? And also what are NYSE's plans to increase investment and exposure in India?
MR. NEIDERAUER: Okay. I think for our own tech spend, we already use companies like Satyam and Wipro quite actively. They're both listed companies of ours. And we intend to probably spend about the same on outsourcing this year that we did last year, but concentrated more with - into our key providers of which the Indian companies are certainly among them. So I would say our outlook in terms of the business we're going to be giving to those companies, is definitely up in '08 versus last year. But as a company, I don't think we're going to spend more on it. We're just trying to be smarter about how and where we spend it.
As you might know in terms of the second question, we are a 5 percent owner in each of the National Stock Exchange and the Multi Commodity Exchange. As I said when I was in India about three or four weeks ago, we've expressed an interest to the regulators that if there were an opportunity to be a larger owner, we would certainly welcome that opportunity. We realize that's not our decision; that's the regulators' decision. But we would certainly be prepared that if the regulators said that increased foreign ownership was acceptable, I think in both of those places, we - in both of those exchanges, we would be willing to increase our stake. I don't think significantly, but we'd certainly be willing to play a more major role.
And we also plan on working with both of those exchanges on some of these ideas we've been talking about so far. One, with the NSC, certainly about cross listings, certainly about technology, and certainly about some of the lessons we've learned running an exchange, that as I said, domestic traffic has increased greatly. And with the MCX, I think it could be more focused on finding opportunities to talk about derivatives products, given that that's a very important derivative exchange in that region. And we have a huge derivatives business in the UK and are just embarking on starting one here in the U.S. Okay. Thanks.
Yes, sir.
QUESTION: Do you know that was a (inaudible) the chairman of - excuse me. My name is Glauco Maggi of La Stampa Italia. You know him well, Mr. Mario Draghi, the chairman of the Financial Stability Forum. What is your opinion about his 65 points in the last document at the G7 in Washington? And there will be those recommendations effective and useful in solving the global credit crisis. Last, do you think that the hundred days decline that Mr. Draghi put for the implementation is realistic?
MR. NEIDERAUER: I'm happy to report, you got me. I've only met Mario Draghi once. I actually don't know the 65 points, but I will talk a little bit about the credit crisis if I can, okay. So I'm sorry that I can't answer all of your questions.
I think in general, the credit crisis has been, I think, more isolated than the majority of people would lead you to believe. I think there's no doubt that it's brought some issues to light, however. And they're issues that, while I think the worst of it is over, I think there may still be some more bad news, but I think the majority of the bad news is behind us. I think it really taught us a couple of things that, whether it's in a G7 paper or whether it's discussed by the regulators when - in Europe and the U.S. and Asia, when we talk about what would we like to do to prevent these types of things from happening again, because that's where all of our focus should be. We can do the post-mortem on the patient later. We should - we have issues we need to deal with right now. And we need to figure out what we want to do right now.
And I think one of the things that we've talked about a lot is, whether we all meant to or not, what's happened in the credit markets has created a bit of a -- what we call - "a crisis in confidence." I sit here as a person who runs a very important exchange that throughout the crisis was open for business, was very transparent and because it's highly regulated, can give investors confidence that it's a safe place to trade. And if you want to make an investment decision to either go against the crowd and by the market or find a way out to minimize your risk, exchanges like ours were open for business throughout the crisis. Unfortunately, the stuff that isn't traded on exchanges and isn't transparent and isn't as highly regulated, the notional value of all that dwarfs what we trade every day on our exchanges, as active as we are.
So the sense I'm getting from our regulators, and I would assume that Mr. Draghi's piece spoke to this as well, is what are we going to do to work together to say that if you're a financial services intermediary and you want to be in these businesses, being in these businesses should come with some obligations and responsibilities. And I think among those obligations and responsibilities are making it easier for your - the end investors to understand what the right price is for these securities are, having a place to trade them. The liquidity in what was a very important market completely dried up. That never, ever happens in a regulated exchange. So I think that's the main area I've been focused on and, again, I apologize that - on all my flying time, I haven't read his reports. So now I have another homework assignment - just what I needed.
So - yes, sir. You had your hand up for a while.
QUESTION: My name is Bernd Neubacher with German Financial Boersen-Zeitung. And I'd like to know what's your strategy, thoughts? New competitors which are emerging in Europe with a new directive MiFID and that context. What's your read on reported merger talks between LCH Clearnet and DTCC?
MR. NEIDERAUER: Okay. First one, in terms of competition, in Europe. There's no question that the competition has now come to Europe in a way we haven't seen it before. It's not nearly as rampant as competition has become in the U.S., but I think there's definitely some competition. There were a few upstarts. Going back to the gentleman's earlier question about some of the really technologically-driven new companies. Their business model is very similar to the ECN (ph) business model here. It's lower cost, it's faster, it's not about price discovery; it's just about quick execution.
Our sense so far in analyzing what's happened is there is no question some of these venues have garnered a reasonable amount of volume. So, obviously, if you look at our market share in percentage terms, given that there are more trades now, our market share is not what it was five or six months ago because there's -- a lot of volume has been created.
The sense we have so far is that this is what I would call new volume. So our volume doesn't seem to be impacted. If anything, you would think our volumes would be down, and they're actually up. But I think it taught us a good lesson that the clients that those venues are attracting and the business model they have that appeals to a certain subset of the client base we really didn't have as a part of our business model. It was a little more of a traditional business model. So I think it's taught us that if we're going to be competitive, we need to offer that choice to attract that subset of the client base.
So, so far, very aware of completion, ready to do pan-European things if we need to, ready to compete with Turquoise if we need to. But I think in the immediate term, it's fairly easy to compete with these business models that are attacking the so-called high-frequency client base. I think that's just offering another product that we haven't offered.
I don't have a lot of insight into LCH and DTC. I've read what you've read. I would say if it were to happen, I don't think you would find us to be in opposition. I think if a couple of well-run clearing utilities can find their way together, it's happened in every other part of the industry where we've been able to figure things out in a transatlantic way, so I don't have a big objection to it.
Thank you. Yes, sir.
QUESTION: My name is Olli Herrala and I come from Helsinki, Finland. I have a question about these cost cuts. Can you tell us something about the nature of those cost cuts and maybe something about trimming the head count? Thank you.
MR. NIEDERAUER: Sure. We've talked a lot about, since we did the Euronext deal, I guess my predecessors talked a lot about the synergies that would come from any transaction. And I believe the numbers that were recorded at the time were 250 million related to technology and 25 million related to non-technology. So if you think about a company like ours, the biggest two buckets of expense are compensation, so call it head count and people, and technology. So I think it's not surprising that most of the synergies that were promised would have come from technology, especially when you think that, at the time, NYSE was running two separate platforms and Euronext was also running two separate platforms, one for cash, one for derivatives.
As we move from four platforms to one, I think I've been quite clear that in the last earnings call we mapped out when we would realize the savings that had been promised, the majority of them are retiring hardware. As you merge the systems and can run on more efficient hardware, you retire kind of the more expensive hardware, you reduce what it costs you to add to capacity. And then along the way, obviously, you don't need the same number of people to run the one combined platform at the end that you need to run the four disparate platforms today. So I think the tech -- it'll be clearer for everyone to see the tech savings faster than it will be able to -- you'll be able to see the head count savings.
At the same time, I think we've got to position ourselves and commit to our shareholders that we're running the company as efficiently as possible. And my observations in four short months as CEO is that there is room to run the business more efficiently. Some of you have noted that the markets are in a bit of distress right now; it's a turbulent time. That's actually really good for us in terms of our ability to hire and attract good talent. In a normal market when things are going well, it's difficult for us to attract people when the normal place we would look would be our customer base. And if things are going well, we don't have the ability to pay that they do, so I can't really compete from a compensation point of view.
In a market like this where they see us growing, they see us evolving, they see us looking overseas and looking into new products, many people at those businesses aren't getting to do any of those things right now because their companies are kind of looking internally instead of externally. So I think you may see some people come and you may see some people go, but it'll be sort of an aftershock. Our main focus is to wring out the technology savings.
I hope that answers your question. Yes, ma'am.
QUESTION: Hi, my name is Yuqing Feng. I'm from China Business News. I have two questions. One question: Could you explain to us, you know, how your China's office is operating and who's your target customer?
And the second question is: As we all know, the Shanghai index fall very sharply in 2008, you know, from almost 6,000 to around 3,000. Do you think China's boom market is over, and do you think it will have any impact to your business in China?
MR. NIEDERAUER: First question, we were the first exchange to be given a rep office in Beijing. It's a very small office. We have just a handful of people in the office, probably five or six people. The main target customers right now are the companies that already list with us on our various exchanges around the world and prospect companies. So, for example, when I was just in China last week, we hosted a dinner in Beijing. We invited 20 CEOs of companies, half of whom were already listed with us, the other half who are what I would call prospect companies who we hope list with us. And they were asking us questions about and learning from the other companies that had already gone through the process how does it work, what do I have to do, how do I get involved. So that's the main focus right now.
When I go, I try to meet as well with not only the companies but, as I said, with government officials, with the regulators, et cetera, so that we can build more of a relationship. Difficult to anticipate what that will lead to, but if China becomes as important as I suspect it will, I think it's very important for the NYSE to have -- and Euronext to have an important relationship in China.
As someone who has traded in the markets my whole life, markets go up and markets go down. Obviously, the decrease in some of these markets has been quite severe. I think these things are all cyclical, so what I remind all of my team every day is we're not here for today or tomorrow, I want us to have a long-term view on everything. So might that slow the pace down a little bit? Sure. I don't think -- I think that's a micro-vent and it's -- and the world is very global, the economy is very global. I don't think it's any more than a speed bump.
So you were trying to ask -- why don't I -- Hajime.
QUESTION: Hajime Matsuura from Nikkei Japan. I have two questions.
MR. NIEDERAUER: Yes.
QUESTION: First question: Listening to your remarks, tell me if I'm wrong, you're more focused on technology and revenue than your predecessor. And so my question is: Is there any future plan to close your trading floor during your leadership?
Second question: Could you share us more about the conversation, discussion you held, with Saito-san of Tokyo Stock Exchange? Would you be interested in having, say, cross-shareholdings, capital alliance? Would you like to extend or enhance the current alliance?
MR. NIEDERAUER: Sure. Okay, thank you. First, it's true that Mr. Thain and I are quite different. I don't -- I think maybe I'm a little more focused, as I said earlier, on integration and a little less focused on acquisition, and you probably would have said the opposite about John. I don't think I'd go as far as saying I'm more focused on technology and revenue than he was. I think there was a right -- there's a right time in each company's life cycle for everything, and I think we needed someone who was more acquisitively focused before and now I think we actually think we need someone who is more integration focused. So, hopefully, he was the right man then and I'm the right man now.
I've got no plans to close the trading floor. I think it's an incredibly important part of our brand. While it's doing less business than it was and we've put everyone in two rooms who used to be in five, I have no plans to close it. I think it would actually be not a good idea at all. In fact, when we close the Amex transaction, we will be using two rooms that are currently empty, so my guess is we'll be using three or four rooms by the end of this year, early next year. So no plans to do anything other than keep that as vibrant as we can.
At the same time, we try not to confuse anybody. We're not here to hold up progress. If the market wants to trade electronically most of the time, our systems allow them to do that. I like having the flexibility in my model where, if you have a period like August, you have a period like January, where the markets do get considerably more volatile, it's fairly easy for us to just move that lever of human judgment up and down, and when people are less comfortable with electronics because it's too volatile, we have plenty of people there who are experts who are at their disposal.
As far as the arrangement with Saito-san, keep a couple things in mind. He and I didn't forge the alliance, right? It was forged by our respective predecessors. And as he and I have gotten to know each other, we've been very candid with each other. We have similar backgrounds. Saito-san grew up at Nomura. I grew up at Goldman Sachs. Saito-san spent some of his career in New York. I spent some of my career in Tokyo. So we have a lot in common. We have a lot to talk about. It's been very easy for us to get to know one another. And I think what we've said to each other is I know this alliance was struck by our predecessors, let's see if it makes sense and let's make the most out of it. And the first illustration of that was the announcement of the Tdex-plus platform that we just announced on Monday. We thought that was the most sensible place to start.
As people who have looked at the Japanese market for a long time, I've never understood, and neither has Saito-san, why there's not a bigger single stock option market. We can get into details about tax treatment or things like that, but the bottom line is derivative growth in every other mature market has exploded in the last decade and Tokyo really hasn't nurtured a listed market. What options market there is, is actually over the counter. And as this gentleman was asking me about the credit crisis, it would be terrible if the options business was allowed to grow as an over-the-counter market because then it will be not transparent, it will be liquid when it's convenient for the dealers only. That's not a good market. I think it would also have a knock-on effect of making the liquidity in Japan quite a bit deeper if we had a robust listed options market.
So we're going to try to do that. We're not the only ones trying to do that. And I think what Saito and I have said to each other is if it works, that'll help us build a foundation and there'll be plenty more to do. Would we consider a cross-shareholding in the traditional Japanese way at some point? Absolutely. I think that for that to happen, though, I think Tokyo has got to take the steps and demutualize, go public, get itself where it's got a public currency. It's a lot easier for the two of us to envision a cross-shareholding, you know, at that time. So we really haven't talked about that much.
I have time for one more question. That gentleman already asked one, so why don't we try you. Thank you. Sorry about that, sir. That's fair.
QUESTION: Klaus Givskov-Christensen from Borsen, Danish financial newspaper. What about London, Frankfurt, Milan and Madrid in your world?
MR. NIEDERAUER: London, Frankfurt, Milan and --
QUESTION: Madrid.
MR. NIEDERAUER: Madrid.
QUESTION: In your world.
MR. NIEDERAUER: We're buying all four of them. (Laughter.) No, there's only so much I can say about all of them. We're actually buying none of them, obviously, so please don't quote me on that. The -- I mean, LSE and Milan are pretty much together, right? I don't think there's much to really contemplate there. They've made their decision. They've decided to get together. I might have thought consolidation might have played out a different way, but it didn't. And so there, I think they're already together and they seem to take the view at the moment, they don't appear to be that interested in expanding the geographic footprint beyond that.
We see the LSE thinking about some -- maybe some new product ventures, maybe some getting into the technology business that we and OMX are in. But I don't really see them doing much. They seem to be looking more internal.
Madrid, to me from afar, seems quite happy to stand alone. That's their prerogative. No ongoing conversations with them. But they seem quite content to stand alone. And I think Deutsche Börse to me looks like a consolidator. They've already done the ISE. I thought that was -- I thought that was wise of them to get into U.S. options business. They've already got a very successful derivatives business and a successful cash franchise. So they to me look like a consolidator. So I think that's -- I think I'd leave it at that. They look like they're in the same position we're in, which they're looking to grow and expand into other regions and into other products.
Okay? I thank you all for coming. It was my pleasure. Hopefully, we gave clear answers to your questions. And if there's any follow-ups, I'm sure my team will be happy to work with you. And thank you for hosting it. We really appreciate it. Thank you.
