Sunday, May 01, 2005

A NYSE for the New Millenium (about 10 years too late)

Bidding war for ARCA. Seats jump almost a million dollars each.

The price of a NYSE membership is now theoretically tied to the value of ARCA shares -- as long there's a deal in the works. Any "bidding war" for ARCA is also giving membership a nice, rising market into which to dispose of the odd seat, to put the luster back on one's balance sheet, to borrow against (for that hot-dog stand or car wash, perhaps), or to mercilessly squish any free-market types who may have caught sight of a little smoke (if not mirrors) and gone short. Marvel ye that the shares of ARCA are hard to borrow?

You must tip your hat to Mr. Thain for carrying the water for the members so well, and for attending as he did to such pedestrian details as limiting stock sellers to those on the wedding list. And while I know nothing of the fine print, I have heard that GS stands to gain a hundred mil or so in fees, as well, on the deal, should it happen. Mr.Thain was apparently carrying a cupful for them, too, but I don't know that anyone feels like tipping his hat about that.

A "business success story," indeed; in that old Wall Street tradition, perhaps. It reminds me of a huge, elaborate configuration of dominoes. It’s every twist and turn is conceived in advance. The dominoes whiz by and dazzle viewers with their tricks, creating an air of suspense. That suspense is tempered by the knowledge that the outcome, barring something no one has reason to expect, is always foreseen and rarely in question. Take note, you neo-quants: this is what the term "financial engineering" really means.

I hope, for sentimental reasons, that they keep the exchange located where it is and not turn that building into high-priced condos (or a holocaust museum). But does it really make sense to? If it’s all just ones and zeroes anymore, maybe it makes sense to off the plant at a thousand or so a square foot and set up a roomful of servers in India, where everything is cheaper. The business can be administered from the Hamptons, or Greenwich, or Palm Beach; and America will have become the boardroom of the world, far removed from the productive assets it oversees. Deep in my visceral parts this thought makes me uncomfortable.

I hope also they treat the valuable the NYSE franchise with dignity and not squander the centuries of equity built into that name. It has to be the most valuable brand in the world, a little tarnish notwithstanding.