July 22, 2005
NYSE Trading Costs Up??
The New York Stock Exchange released a 844 page filing with the SEC in anticipation of its merger with Archigpelago Holdings. The Exchange, a private, not-fot-profit organization has not been subject over the years to the periodic filing requirements of the 34 Act that apply to a publicly traded company in the United States so the filing is a rare bit of information into the Exchange's planning and operations. The New York press has picked up on the Exchange's plans to charge members for trading licenses after the merger and its plan to cut staff by ten percent. These plans affect the New York trading insiders in the New York financial community.
Deep in the material is a far more important projection -- the NYSE plans to raise trading costs for some transactions. After cutting costs, the NYSE plans to increase profits by raising trading fees, fees that will be passed on to all those who trade through brokers/dealers on the exchange -- the public. The NYSE could do this only if they did not face serious competition from other trading venues for order flow. Otherwise to raise prices would mean they would lose trading volume. When the SEC and the Justice Department assess the merger for antitrust problems, they should note this plan to increase profits by 600 percent while increasing trading prices. It is an admission of market pricing power that would occur if the merger goes through. It is also an admission that the current SEC rules, emboddied in Regulation NMS, consolidate market power in the NYSE. This is not good.
July 22, 2005 | Permalink
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