Chicago Stock Exchange Plans New Market, Open To Alliances - CEO
01 Maggio 2012 - 6:01PM
Dow Jones News
The Chicago Stock Exchange aims to more than double its tiny
share of U.S. stock market trading with a new electronic platform,
and is open to strategic alliances as it looks to recover from a
loss last year.
Running dual stock exchanges would let parent CHX Holdings Inc.
structure its fees and trading services to appeal to a broader
swath of institutional investors, retail brokerages and trading
firms, according to CHX Holdings Inc. Chief Executive David
Herron.
"We hope to attract enough volume to offset the relatively minor
costs of duplicating the functionality," Herron said in an
interview.
The Chicago Stock Exchange, or CHX, traces its roots back to
1882 and is the last of the independently operated regional stock
markets that once dotted the U.S. For a time it was known as the
Midwest Stock Exchange after absorbing bourses in Minneapolis, St.
Louis, Cleveland and New Orleans.
Broker-dealers Goldman Sachs Group (GS), E-Trade Financial Corp.
(ETFC), Bank of America Merrill Lynch (BAC) and JPMorgan Chase
& Co. (JPM) are the biggest owners of CHX, together holding
about one-third of the company. Other brokers, private investors
and employees own smaller stakes.
CHX still maintains a slate of listings that include companies
like International Business Machines Corp. (IBM), PepsiCo Inc.
(PEP) and Walgreen Co. (WAG), though nearly all of its listings are
shared with much-larger rivals NYSE Euronext (NYX) and Nasdaq OMX
Group Inc. (NDAQ).
The CHX currently represents just a sliver of the average 6.4
billion shares traded daily on U.S. markets, with a U.S. market
share of 0.37% over the past week, according to data from BATS
Global Markets.
Herron said he hopes to boost that figure after an "extremely
disappointing" 2011 that saw U.S. market regulators temporarily
stop CHX from using its systems to facilitate large, off-exchange
stock transactions carried out by its users. The prohibition, which
ran from August through December of last year, cost CHX's parent
about $3 million in lost revenue as major customers took their
business elsewhere, Herron said. The company lost $2.7 million last
year.
In a letter to shareholders sent last week, Herron said that CHX
remains open to alliances, transactions or other ways to leverage
its exchange license and trading infrastructure. No bank has been
engaged, he said in an interview.
Running a second stock exchange could allow CHX to set up one
market aimed at individual investors and high-frequency trading
firms carrying out smaller-sized trades, Herron said, with the
other directed toward financial institutions doing larger
transactions.
"If the combined entity approaches 1% [of daily stock trading
volume], we'd be happy and be on our way," Herron said. "You don't
need 100 million shares traded per day to break even."
Herron said his staff has begun crafting legal documents to
submit to the Securities and Exchange Commission, which must
approve any new exchange.
-By Jacob Bunge, Dow Jones Newswires; 312 750 4117;
jacob.bunge@dowjones.com
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