For New York Stock Exchange, a sell order
The Big Board just isn't so big anymore.
In a deal that highlights the dwindling stature of what was once a centerpiece of capitalism, NYSE Euronext, the parent of the New York Stock Exchange, is being sold to a little-known rival for $8 billion -- $3 billion less than it would have fetched in a proposed takeover just last year.
The buyer is IntercontinentalExchange, a 12-year-old exchange headquartered in Atlanta that deals in investment contracts known as futures.
IntercontinentalExchange, known as ICE, said Thursday that little would change for the trading floor at the corner of Wall and Broad streets, in Manhattan's financial district.
But the deal makes clear that the clout of the two-centuries-old NYSE has been eroded over decades by the relentless advance of technology and regulatory changes.
The NYSE dates to 1792, when 24 brokers and merchants traded stocks under a buttonwood tree on Wall Street. Today most trading doesn't require face-to-face meeting at all. It's done on computers that match thousands of orders a second.
Three decades ago the floor of the New York exchange was full of bustling traders. Today one of its largest booths belongs to the cable news channel CNBC, which broadcasts from there.
The introduction of negotiated, rather than fixed, commissions for securities transactions, in May 1975, marked the start of a gradual decline in brokerage fees for traditional stock trading. It also gave rise to discount brokerages, like Charles Schwab, that traded for customers at lower rates.
While brokerage fees have declined, futures exchanges like those central to ICE have retained profit margins, said James Angel, an associate professor in finance at Georgetown University's McDonough School of Business.
Stock trading is a "dog-eat-dog business where the profit margin per share is measured not in pennies, not in tenths of pennies, but in hundredths of pennies," said Angel, who also sits on the board of Direct Edge, a smaller stock exchange.
ICE was established in May 2000 and went public in November 2005 -- on the NYSE.