Stocks or commodities?
What makes a company choose the New York Stock Exchange or the Nasdaq? The latter’s technology problems that caused the 2012 Facebook debacle may linger for a big issuer like Chinese e-commerce giant Alibaba, which has just chosen the Big Board for its initial public offering. For most companies, though, it’s little things that matter.
There was a time when the Big Apple’s two marketplaces exhibited clear differences. The 222-year-old NYSE represented a bastion of Corporate America which big industrial and financial companies called home. It relied on floor traders called specialists to provide liquidity. The far younger Nasdaq, meanwhile, made a name for itself as an electronic exchange hosting technology and other high-growth firms.
Today, the NYSE can place orders for stocks listed on Nasdaq, and vice versa. And while some of their respective indexes arguably help boost volume, neither dominates trading any more. Each accounts for under a quarter of all U.S.-listed stocks bought and sold, according to KBW. Dark pools, broker-established trading venues and the likes of BATS control over half the market.
As a result, the sales pitch has changed. The Big Board makes much of having both human and electronic trading platforms. The NYSE and Nasdaq offer issuers an array of services, including hosting investor relations websites, that require no trading prowess at all. Nasdaq has developed more of this expertise in-house. Its so-called corporate solutions business, at $230 million, totted up $2 million more revenue than listings last year. Nasdaq’s fees can be cheaper and it often throws in items like data access and private communications software for board directors.
Even these extra goodies don’t always make the difference. Old-fashioned ego-massaging plays a role. The NYSE, for example, turns a company’s debut into the equivalent of a camera-ready Hollywood-like event, capped by presiding over the storied trading floor to ring the opening bell. The Nasdaq, though its market makers are but a series of zeros and ones, has created a copycat version at its Times Square headquarters.
An even shallower selling point is the ticker symbol. It was long assumed, for example, that the NYSE held single-letter M aside for years in hopes of persuading Microsoft to defect. Once, briefly, the NYSE and Nasdaq might have shared a heated rivalry. As traders of stocks, though, they have become little more than commodities.