Nachtmare on Wall Street

Commentary: Another American institution goes kaput

NEW YORK (MarketWatch) 02.15.2011 — This one hurts.

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.

image 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.

NEXT PAGE

disclaimer

Want to look anything up?

Please visit  stories, etc. for more pictures, stories, etc.