Upcoming Trip to Asia

3:30 P.M. EDT

MS. NISBET: Good afternoon, I'd like to introduce John Thain, CEO of the New York Stock Exchange. He's here today to give us details on his upcoming trip to Asia. We're very much looking forward to hearing your remarks and glad that you could make it here today on -- especially on such a rainy day. Please keep your questions brief after Mr. Thain’s remarks and please state your name and affiliation before asking your question. Thank you.

MR. THAIN: Well, thank you very much for inviting me here this afternoon. I am very excited about my upcoming trip to Asia. Asia -- the Asia Pacific region -- is a very important region for the New York Stock Exchange and a very big opportunity for us. When I'm there, I'll be meeting with government officials, regulatory officials, both listed companies and prospecting for more listed companies. And just to give you an idea of the New York Stock Exchange at the moment, we have 2,780 companies listed on the New York Stock Exchange.

The market value of all those companies is $20 trillion U.S., so we're more than five times bigger than other equity market in the world. Of that $20 trillion U.S., over $7 trillion are non-U.S. companies. So you can see that the New York Stock Exchange is already very much a global market and the international companies are very important to our overall marketplace.

I think that we offer some very important advantages to international companies listing on New York and we are interested in companies' dual listing both in their home market and on the New York Stock Exchange. So we're not looking for international companies to only list on New York. We think it's quite important for them to be listed in their domestic market, as well as in the international market.

What we offer those companies is, first, access to the single largest pool of capital in the world. We have 90 million investors, and as I said, $20 trillion of market value traded there. We also give companies great visibility and so it's a great opportunity for companies to really get a high profile and be able to address both the opportunities of the companies themselves as well as the opportunities in the country that they are based in. We believe that the access to both institutional investors and retail investors is a big advantage for companies.

We can demonstrate and there have been a number of academic studies that companies that, in fact, list on the New York Stock Exchange as opposed to only being listed in their home market, get better valuations. Well, that makes sense because what we do is by accessing a much bigger pool of capital, by accessing the U.S. investor base, you have the opportunity to raise the overall valuation of your company.

You also, through having a U.S.-listed stock, have the advantage of being able to give your U.S. employees equity, whether it's stock or stock options and you also have a currency to make acquisitions in the United States. So overall, we think we offer a very attractive package to international companies accessing this market. And as I said, the international component of our overall marketplace is very important.

Specifically on India and China, which are the two countries that I'm going to be visiting on this trip, we already have a very good relationship with both countries and with companies in both places. I actually think that India and China are the best examples of what the New York Stock Exchange really does because we have two economies growing very rapidly -- frankly, two of the fastest-growing economies in the world -- and the companies in those economies need access to capital. And so we are the supplier of capital to the world and it is on the New York Stock Exchange that we really do have the opportunity to provide capital to those companies. Just to give you an idea, in past years, Chinese companies raised about $24 billion worth of capital in the U.S. market.

The other thing that we do is we find opportunities for investors to invest in rapidly growing economies. So as global investors look around the world, they are looking for growth opportunities and the Asia Pacific region and specifically India and China are two very rapidly growing opportunities where investors are looking for more ways to get their investable capital into those marketplaces and our listed companies are really an excellent way for them to do that. So it's really the perfect blend of raising capital for the growing economies that need capital and the companies in those economies, as well as offering investment opportunities to U.S. investors and global investors to participate in the growth.

When we look specifically at India, we have eight companies listed there already. India is, you all know, a very rapidly expanding economy and I think there's a lot of opportunities for us to get new listings there. We also have 30 companies in the Greater China region listed already on the New York Stock Exchange, so we have quite a strong presence there. Those 30 companies have market value in excess of $500 billion, so they're very large companies as well.

Overall, we believe that we offer the opportunities for more Chinese companies and more Indian companies to come into this marketplace and I'm very sure, given the current investment climate and particularly the current opportunities to invest in and participate in China and India that to the extent we can attract more companies to list here, that we'll get a very positive reception from the part of U.S. investors.

So I am looking forward to being in the region. I was last in the region about a year ago and from our perspective, Asia-Pacific, in particular, India and China, are very, very attractive and good opportunities for us and I look forward to being there. I'll be happy to take questions.

Yes.

QUESTION: Siu-Wai Cheung with Ta Kung Pao Hong Kong. Sir, I would like to ask you what do you think of the Chinese Government's decision of the B shares reform? Would that be a plus for you to enlist more companies to move their listings or do listing of the New York Stock Exchange or where that's opened up the market for foreign investors directly invest in Chinese stock market?

MR. THAIN: Well, I'm very supportive of the opening up of the Chinese market for investors to invest directly. I think that's good for the Chinese market. However, there are many, many investors who really invest through the U.S. marketplace. And so I really believe in having a dual-listing structure where companies can be listed, whether it's on Shanghai and/or Hong Kong and then also in New York. That gives investors the best access to the companies.

Also by listing it on New York, the companies come into this marketplace and really have the opportunity to tell their story, investors get to see the management and get an opportunity to understand what is the growth prospects for the company itself, as well as what is the growth prospects for the company and for the country. So I really think that a dual-listing structure is one that makes the most sense.

QUESTION: Deepanshu from CNBC India. My first question, you did receive a number of companies this year, Indian companies, increasing their float sizes, ICICI Bank, HDFC, but you haven't seen any new clients or new companies listing. Why is that? Do you think this has something to do with Sarbanes-Oxley and the cost of compliance?

And my second question, you are increasing competition with NASDAQ for Indian business. How do you see that playing out and what sort of competition are you seeing from NASDAQ?

MR. THAIN: Well, first of all, one of the reasons I'm going to India is to make sure we do, in fact, get some more listings from India. Sarbanes-Oxley is a concern of all international companies. It's also a concern of the U.S. companies. And particularly, the Section 404 part of Sarbanes-Oxley. We have been very actively working with the SEC and with the Public Accounting Oversight Board on making Section 404 less burdensome to international competition, as well as less burdensome to U.S. companies. You know that the SEC gave international companies an extra year to comply.

They've also recently put out an interpretation that focuses the accounting firms more on looking at things that are material, taking a more risk-based approach and relying more on internal audit and on management, rather than duplication of effort on the part of the accounting firms. So I actually think that we're moving in the right direction in terms of reducing the cost and the burden of Section 404.

And I don't think, as in the case of India specifically, when you asked that question, it really I don't think has been an issue for Indian companies. Almost all of the Indian companies that qualify to list on the New York Stock Exchange are listed -- actually, all but one is listed. And so most of the companies -- this is true for India and China -- the companies that you see listing on NASDAQ don't qualify to list on the New York Stock Exchange. We have of all new listings of the companies who qualify to list on New York, we have over 90 percent market share. So basically almost every company that does qualify does, in fact, list on New York. What you have been seeing is smaller companies that don't qualify to list on New York do, in fact, on NASDAQ.

One of the advantages of our Archipelago transaction -- we're in the process of merging with Archipelago -- Archipelago will allow us to create a second listing brand where we will list companies on Archipelago that don't qualify to list on New York. And so we'll have an opportunity to really compete with NASDAQ for those smaller companies.

QUESTION: Shawn McCarthy from the Globe & Mail in Toronto. Back to your discussion of Sarbanes-Oxley and the accounting, is there -- are the accounting systems an issue for you as you look to bring in international firms and can they comply with all the requirements and is it transparent enough for investors to really get a good handle on what is happening in the firm, not that it's necessarily less stringent, but just different often?

MR. THAIN: You know, one of the great advantages of having international companies list on the New York Stock Exchange is that they have to comply with U.S. accounting standards. They have to comply with U.S. corporate governance standards. They have to comply with U.S. transparency standards and disclosure standards. And actually, I think that's a great thing because the attraction of getting access to the world's largest capital markets really does push some of those companies to comply with what are the highest standards in the world and that's very good for investors. So yes, I think that you can rely on the fact that these companies do, in fact, comply with U.S. standards and I think that's a good thing.

QUESTION: Could you tell us a little bit more about -- okay, sure -- Maggie* Shiff* on SinoVision? Could you tell us a little bit more about the specific mission of your trip to China this time because I know that you were in Shanghai last time and you also give a speech at Fudan University.

So I'm just wondering if there are people that you would talk to -- you need or if there is any domestic investment of community that you want addressed and also as we all know that government relations is a big factor in bringing more companies to expand overseas in the United States. And so does NYSE have any kind of plans to expand its business in China? Do you plan to open new offices? Thank you.

MR. THAIN: Sure. And that's a great question. When I'm in China, I'm scheduled to meet with government officials as well as with listed companies and prospective listed companies. I will be in both Shanghai and Beijing. I think you're absolutely right that meeting with government officials is very important, as I did the last time I was there.

In terms of the exposure there, I gave a speech, as you said, at Fudan University. Actually, this time I will be at Tsinghua University. So I will be speaking there.

And from our perspective, we have a memorandum of understanding with the Shanghai Stock Exchange and we do look to work with them to try to help develop their market. And I certainly think that there are opportunities for us in China.

QUESTION: Bernd Neubacher. I'm with the German Financial Daily Boersen Zeitung. In the papers, a few weeks ago, you could read about an interest of private equity investors in taking a stake in New York Stock Exchange. I wanted to ask if you could confirm if there was or they even -- is there such an interest?

And my second question, in the U.S. SEC filing, it says that (inaudible) to the derivatives market? I wanted to ask if it possible to elaborate a bit on this because when you look at options exchanges, really no one is making really money except for the ISE, which has a (inaudible) which is perhaps better than -- and one of the nice, perhaps, last word on long-term expansion on the prospects concerning Europe, which exchanges are most appealing to you at the moment in Europe, now could such an alliance operation or merger could look like?

MR. THAIN: I will -- that's a very good question but it will take up about the rest of the time for it to be answered completely so let me do the best that I can.

First of all, I'm going to take the middle part of your question first, which has to do with the strategy of the exchange and what are we moving to trade. And, you know, when I look around the world, I really start in Europe and I look at the Deutsche Borse and I look at Euronext and I see exchanges that are, first of all, public and for-profit exchanges -- the Deutsche Borse's market value is probably $10 billion U.S. -- and I see businesses that have a much broader product base, so they trade cash equities, they trade options, they trade futures, they trade derivatives, they trade some fixed income instruments. And in the case of Euronext and Deutsche Borse in particular, they are also vertically integrated so they have -- some of them have -- clearing functions and custody functions, which really is not possible on the part of U.S. exchanges.

And when I come back and I look at the U.S. market, I see the U.S. market as very fragmented, the options markets are separate from the cash markets, which are separate from the futures markets. There are probably too many exchanges, both cash exchanges and options exchanges and, you know, there are fewer futures exchanges. So I think there's a lot of opportunity to consolidate the marketplace and part of the strategy between the Archipelago transaction is that we are first becoming a public for-profit company so that we can compete in that consolidation process.

And second of all, we're diversifying our product base. So besides the cash listed market, we will pick up a position in the over-the-counter market, which we don't have today. We will pick up a position in the options market through the Pacific Exchange, Archipelago has about a 10 percent market share in the options business. We'll also pick up a very good platform for a rapidly growing product in the U.S. called exchange-traded funds, which are growing very quickly. And we also pick up a platform that we can use to trade fixed income instruments. And I mentioned before, we will have the ability to develop a second listing brand for smaller companies.

So through that transaction, we will have a broader product base and, frankly, more revenue growth opportunities as well as becoming public. So I think that all will put us in a much better competitive position with all of those other players in the world.

You asked about the private equity investors and you've seen from the activity in the New York Mercantile Exchange, there's a lot of interest in the exchange space right now on the part of private equity investors. But for us, for the New York Stock Exchange, we don't need capital, we're not looking for private equity investors, it doesn't fit that strategy of broadening our product line and becoming a public company and having a currency to make acquisitions and can be part of the consolidation process. So we're not talking to or interested in private equity investors.

QUESTION: I'm Doug Lu, Xinhua News Agency China. I have question. China's domestic circle*, in my case, very small relative to the size of the economy. And at the same time, there's much "hot" money in Thailand market. How to attract to the struggle* to the domestic third market? How to attract such "hot" money? Can you give us some advice?

MR. THAIN: Well, I think that when you look at the Chinese stock markets, it's very unusual to have an economy that's growing as quickly as the Chinese economy is growing and have an equity market that is at a four-year lows. And so there are definitely changes that need to be made to the structure of the equity market in China.

I'm going to answer your question more in general rather than specifically as it relates to China. But all equity markets need a number of things to function well. They first need a good regulatory structure -- a good regulatory oversight structure. They need rules as to transparency and disclosure so that investors can have confidence that when they're investing in a company that the balance sheets and income statements are real and that they have the information they need to make informed decisions. They need to make sure that the rules under which the market functions are enforced so that the trading is fair to investors.

In the case of many state-owned companies, where either all or a substantial portion of the equities are owned by the government, that creates an overhang on the market where investors are concerned about both the motivation of management -- are they really motivated to maximize the value of the shares or are they trying to do something for the benefit of the government. And second of all, the overhang that that creates in terms of the potential for the government to sell shares.

So there are a number of things that can be done to improve investor confidence, improve the way the markets function and which ultimately will then lead to the market tracking closer to the economy, which is what most markets do.

QUESTION: Hi, Andrei Postelnicu with Financial Times. You said you're going to meet with Chinese Government officials and you just touched on the subject of what equity -- what well functioning equity markets need. Do you think -- are you going to be discussion these issues with the Chinese Government officials? I mean, are you going to -- is there any kind of a talk of advising them on how to, you know, on the regulatory oversight of their markets and, you know --

MR. THAIN: Certainly, the structure of the Chinese markets will be one of the topics of discussion. I wouldn't characterize it as advising them. I'd be very happy to offer suggestions and advice if they were interested in what I had to say.

QUESTION: Neal Sandin from NHK Japan Broadcasting. I'm just curious, kind of piggybacking on what he said. With the current political backlash that's occurring in Washington against Chinese companies investing in the United States, how do you feel that might affect or inhibit your plans to get more Chinese companies to list in the United States, particularly in light of one of the (inaudible) that you mentioned turned to former mergers and acquisitions?

MR. THAIN: Well, I think that in general the U.S. is actually quite open to mergers and acquisitions by international companies broadly into the U.S. marketplace. And I think we should be. And so I think that the most recent events did not set a good example for free trade and for open marketplaces. I would certainly hope that that doesn't discourage companies from listing here and I, frankly, think that that's the exception not the rule.

QUESTION: Again, Deepanshu from CNBC India. There are a number of large government-controlled companies -- I'm thinking of companies like ONGC* in the oil space -- will you be having any discussions with the Indian Government on privatizing this further by the (inaudible) rule so that they have more dollar caches to buy and to make acquisitions?

And second, you said that you didn't think that Sarbanes-Oxley particularly was what was stopping and more Indian companies from listing. Is it then the fact that the Indian markets are at an all-time high and that capital is available in India? Is that the problem?

MR. THAIN: Well, first of all, I don't think it's a problem of the Indian markets at an all-time high. I think that's a good thing. I'm a supporter of all markets doing well. I think that there -- it is a process whereby the Indian companies are beginning to expand internationally, are beginning to access the global capital markets. And so I don't think there's any problem. I think it's just a question of timing. And I'm actually optimistic that there will, in fact, be more Indian companies accessing the global marketplace and in particularly the New York Stock Exchange over the next several years.

So I just think it's the beginning of the process, you know, the Chinese companies have been accessing the U.S. marketplace for a longer period of time. You know, we really began our dialogue with China in 1986. So India is just newer and I think the companies are just in the process of developing. I don't think there's any particular hindrance to that.

QUESTION: Sorry. The earlier question, which is on talking to government companies about listing by ADS?*

MR. THAIN: Well, whenever I go to any country where there is significant -- a government ownership of some of the infrastructure companies, I always talk to them about privatizing them. The infrastructure companies, actually, are very attractive to U.S. investors because if you have a country like India, which is, you know, growing probably north of seven percent, one of the ways you can participate in that growth as an investor is to own shares in some of the infrastructure companies because they tend to participate in that growth.

And so the energy sector, the telecomm section, the financial services sector -- those are all very attractive places for investors to invest and to participate in the growth.

QUESTION: Yes. (Inaudible) News Wire Agence-France Press. How long did it take you to get eight Indian companies listed on the New York Stock Exchange? And about 30 you said from China? And do you have any -- and you have some targets of the newcomers that you would like to add? And any deadlines?

MR. THAIN: Well, I don't think we want to put deadlines or timelines on that because it's a process that's very dependent on the companies themselves about when they are, kind of, ready, both to comply with all the U.S. requirements as well as when they actually need the capital.

The specific answers to your question -- as I said, we really began our relationship with China in 1986. We had -- we actually organized something called the China-United States symposium on financial markets and that really was the beginning of that process. And the first company was listed in 1993, I believe. So that was the first year we had a listing.

QUESTION: Olli Herrala, Kauppalehti, Finland. I'd like to ask about the interest of European companies and (inaudible) market. So because of all these new regulations, how do you see the interest of European companies coming into the New York Stock Exchange?

MR. THAIN: Yeah, the impact of, I think, four things has slowed down the flow of new listings by European companies in the U.S. markets. And those four things are: First, Sarbanes-Oxley, which we talked about and which I think we're making progress on.

Second, the lack of conversion to the accounting standards. So Europe right now is just adopting their new international accounting standards. And so it's particularly burdensome for companies not only to have to switch their accounting based on European standards but then also to have to report in U.S. GAAP.*

Now, we're making a lot of progress on that and I'm very optimistic that we will reach convergence eventually. But at the moment, the change in Europe, as well as the need to have U.S. GAAP* is a negative.

The third negative -- and again, this is true much more for European companies but it's also true for all companies -- is the current litigation environment in the United States. And the fear of class action lawsuits and the impact on that on companies is certainly a negative for international company coming into this market.

And then lastly, the Euro, itself. The Euro, no matter what you say about the level of the Euro and no matter what anybody says about the political infrastructure of the Euro, the Euro, from the point of view of the market, has been a huge success. And so the Euro market is now deep enough and liquid enough that companies can raise a lot of money in Euros and they don't need to come to the U.S. market. And that really wasn't true when we had Deutsche Marks and French Francs and et cetera where if a company is going to raise a lot of money, they really needed to access the U.S. market.

So for those reasons, there has been a slowdown in European listings. There really hasn't been an real push to delist but I do think that we have to work towards accounting convergence. We have to work towards mitigating the burdens of Sarbanes-Oxley and particularly 404. And on the litigation front, at least we're making some progress in Congress on class action tort reforms. So I'm optimistic about that.

So I think that we will get more European listings but it definitely has slowed down.

QUESTION: Megan Davies, Reuters. I just wanted to be given an idea of a companies you'll be meeting with in China and then you -- and whether you're close to getting new listings from any of them?

MR. THAIN: My schedule keeps changing and that seems incredible since I'm only going to be there for five days, but it's literally dozens and dozens of companies. And some of them are already listed and some of them are prospects and you know, I'm not going to give odds as to how -- what exactly will be the outcome of that because it's an ongoing process and the dialogue is, again, one that we want to have over many, many years. You know, we view the listing of our companies as a very long- term relationship. After companies are listed, we have them back to the exchange to do analyst meetings, to do board meetings and, you know, some of our companies have been listed for a hundred years. And so it really is a long-term process and this is an investment in one of the most important regions in the world and, you know, I will continue to go there and prospect and, you know, we’ll get companies as they need to access the capital markets.

One last one in the corner.

QUESTION: Could you tell us what the target date is? What the target date is for the opening of the office in Beijing?

MR. THAIN: The answer is no, I can't. We are opening an office in Beijing but we are awaiting government approval so that will be one of the other topics of discussion while I'm there.