The Deutsche Boerse and NYSE Euronext Group unveiled their
merger plan Tuesday. Now may be a good time to brush up on how to make an
umlaut on your keyboard.
Under the terms of the deal, the Germans will control it all:
a 60% majority stake, control of the board and chairmanship, a headquarters in
Europe — and the CEO? He’s American, but his name is Niederauer. Read the full
story on the Deutche Boerse–NYSE deal.
Though the deal doesn’t really pose a threat to our financial
markets, and the loss is largely symbolic, it’s a blow to national pride. The
Big Board is as American an institution as the Washington Monument or the Golden
Gate Bridge. See related commentary, Das Exchange.
NYSE’s Duncan Niederauer is set to become chief executive of
the merged entity.
The only question is how we allowed this to happen.
To understand how the NYSE lost its global prominence, one needs to go back to Dick
Grasso, whose reign ended in 2003 amid a pay scandal. Grasso had managed to
promote the NYSE and capture new listings, but underneath the facade the Big
Board was getting walloped by up-and-coming electronic exchanges — they were
fast, cheap and deadly efficient.
Enter John Thain, who transformed the exchange through the
acquisition of one of those up-and-comers, Archipelago. And he took the NYSE
global through the acquisition of Euronext in 2006.
But to do those deals, the NYSE needed currency. It went from
private to public. It was a strategy that backfired as the NYSE’s stock
languished amid the financial crisis and as Thain’s successor, Duncan Niederauer,
failed to harness momentum.
That’s how you go from target to prey.
The NYSE isn’t alone. A multitude of U.S. companies have
miscalculated and lost muscle on the global stage: Anheuser-Busch and Lehman
Brothers for two, and even Facebook has significant foreign ownership after
Goldman Sachs Group Inc. bungled its private fund-raising effort.
But the NYSE stands out because its mythical status towers
above those names. Losing the Big Board and its iconic trading floor, even if
it’s become a symbolic relic, is a painful reminder that U.S. institutions have
lost their edge in the global marketplace. Not that they’re not players, but
they no longer dominate.