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NYSE Had Sought Bid from Berkshire


txlaw
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Agreed.

 

Dark pools and alternative exchanges like BATS & CHI-X steal volume and drive prices down. Trading volumes are decreasing steadily. And it doesn't help that the regulators are watching the entire business closely. Also interesting point (at least in Europe) is that the crackdown on short-selling combined with transaction taxes and other regulatory requirements drives people away from "classic" stocks and into obscure off-exchange derivatives and swaps (which was exactly what they wanted to avoid in the first place .. ) because it's cheaper and easier. For example the CFD market is growing quickly.

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I've always wondered why more people were not attracted to exchanges.  It's about as close to a toll bridge as you can get.

 

You should love Urbana Corp then.. its a closed end fund that holds only exchanges and some smaller position in banks..

 

It's just too bad the person running it is a poor capital allocator

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I've always wondered why more people were not attracted to exchanges.  It's about as close to a toll bridge as you can get.

 

 

It depends on the type of exchange.  I’m sure this is not new to many of you but the economic value (ability to earn returns well in excess of cost of capital) of an exchange boils down to the network effect it can create.  To have a strong exchange network you need to create a strong closed loop system in which new and old volume is ‘stuck’ in your network.  Exchanges that are able to do so have products/markets that are deemed proprietary.  Futures contracts are proprietary because the CFTC considers each contract proprietary to the clearinghouse in which it was propagated.  Therefore, even though December 10Y Treasury futures offered by the CME are identical to those offered by ELX they cannot be transferred amongst their respective clearinghouses.  In these instances the issue becomes who can aggregate enough volume to hit critical mass first.  Once critical mass is hit the value (in the eyes of the customer) of having a deep and liquid market to trade in exceeds the incremental up-charge cost of going with the more expensive (but more liquid) exchange.  Also some futures products (and options) benefit from simply having an explicit monopoly based on product IP.  Unlike a barrel of oil equity indices are considered proprietary IP so, by way of example, if you want to trade SP 500 options the CBOE is the only show in town.  In these types of markets (futures and some cash options) exchanges can increase trading/subscription prices without losing any volume (toll bridge).  The problem with the NYSE (cash business not LIFFE business) is there’s nothing to close the loop.  Cash equities are entirely fungible with the only differentiating factors being price and execution speed (at least for the HFT crowd).  NYSE’s cash equities business may benefit at the margin from economies of scale and brand awareness (debatable) but I think they have lost the meat of their toll bridge.

 

As a side note I think the CME demutualization is an interesting example of Munger’s lollapalooza effect.

 

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I've always wondered why more people were not attracted to exchanges.  It's about as close to a toll bridge as you can get.

 

 

The problem with the NYSE (cash business not LIFFE business) is there’s nothing to close the loop.  Cash equities are entirely fungible with the only differentiating factors being price and execution speed (at least for the HFT crowd).  NYSE’s cash equities business may benefit at the margin from economies of scale and brand awareness (debatable) but I think they have lost the meat of their toll bridge.

 

 

 

I may have misunderstood this but based on Sanjeev's article it seems that WEB's purchase of NYSE-Euronext was contingent on NYSE-Euronext getting rid of the derivatives business. From the article:

 

"Bankers from Perella Weinberg approached "Company A" on November 25, the filing said. On November 28, "Company A" presented an offer that was less than the ICE bid and was conditioned on the sale of NYSE Euronext's European derivatives business for a minimum price."

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Guest longinvestor

Just speculating what could've happened had this deal gone thru!

 

- back to the ol times - settling stock sales with certificates

- outlawed all the synthetic "stuff"- Munger wants this

- NYSE becomes OSE ;D

 

Alas

 

 

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  • 3 weeks later...

Watching Warren on CNBC today (talking about the Heinz deal), the CNBC anchors brought up the NYSE deal.  Warren said that, contrary to what was previously reported, he never spoke with anyone about buying the NYSE and that he wouldn't have had any interest in doing so even if someone had approached him about it.

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The news was first reported by CNBC's David Faber.

I watch CNBC every morning ,MR Faber seems all to willing to put out information which is false, incorrect ,misleading to curry favour with his sources. I think I have watched him ask the question about Ackmans investors deserting him in reference to the Herbal Life story which is just parrotting Icahns line, about 5 times in the past few weeks.

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