NYSE’s new president takes on challenges as exchanges compete for IPOs, fees

Trader Talk

The elevation of Stacey Cunningham to president of the NYSE Group represents a full circle for one of the few women who have worked on the exchange floor.

Cunningham is well-known to traders. She started her career on the floor in 1994 as an intern with specialist firm Murphey, Marseilles, Smith & Nammack but started full time in 1996 for JJC Specialist, which was a division of Quick & Reilly. She became COO in 2015, not long after Intercontinental Exchange acquired the Big Board.

Since then, she has played a crucial role in modernizing NYSE’s trading operations, including the rollout of Pillar, an integrated trading platform that connects all the NYSE’s markets. While there have been some glitches and delays in the rollout, it has been the most ambitious technology overhaul the NYSE or any global exchange has ever done. She has also helped modernize the floor by expanding trading to stocks listed on the Nasdaq and NYSE American.

She is also NYSE’s first woman to be president. Her new job starts Friday and comes at a time when the business of the exchanges is increasingly competitive:

1. Listing fees. About 9 percent of ICE’s revenue comes from listing fees, which generally are higher at the NYSE than at Nasdaq. NYSE has consistently engaged its listing members on what they view as the main advantage of listing there: access to designated market makers.

2. Initial public offerings. NYSE and Nasdaq are fiercely competitive for new listings, and while the NYSE has cut into Nasdaq’s usual dominance in tech IPOs in the last few years, that rivalry has not diminished. A bigger problem looms. Many firms are reluctant to go public as regulatory burdens have increased and as private equity has successfully locked up many of the newer companies, particularly tech “unicorns.” How to get more companies to go public will be an increasing issue for Cunningham and her successor as COO, John Tuttle, who is currently NYSE’s global head of listings.

3. Transaction fees and dark pools. Only about 5 percent of ICE’s revenue comes from fees on trading activity in the U.S. equity markets, according to Sandler O’Neill. Fragmentation is an increasingly important issue for all the exchanges. About 40 percent of U.S. trading is done off-exchange in dark pools. The NYSE and its competitors want to move more of that back to the “lit” exchanges, which would mean more revenue.

4. Market data. As growth has been slower in listing and transaction fees, market data fees have become the growth area. ICE gets about 44 percent of its revenue by charging for market data, and at Nasdaq it’s about 26 percent. As market data has become a more important source of revenue, and as the exchanges have charged more, there has been some push-back from Wall Street. “The industry has been vocal about their resistance to further price increases,” Sandler O’Neill’s Rich Repetto told me. The SEC recently refused a fee increase in the organization that handles the consolidated feed for the exchanges.

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