Monday, November 02, 2009

NYSE Euronext Has No Technology Strategy

NYSE Euronext(NYX) posted quarterlies and watched investors sell off its stock. In reading their earnings report one is struck by how many businesses they are in and this supposedly provides diversification. But the exchange business is technology driven. Yesterday’s software is today’s junk. Management does not speak to the technology strategy and the capital intensive nature of the business. Yes they are the market leader, today but do they have the environment that allows for innovation or will some whiz kid from Google or someone’s garage come out and clean your clock.

The other issue is the uncertainty of the Obama administration and where the regulatory environment is headed. Other countries are also having indigestion and are not too far behind. What will the costs be of any new regulatory reforms and how will NYSE Euronext be able to pass it through to the end user. If the current administration turns out to anti-speculative and non supportive of high frequency trading these guys have a major problem. The exchange executives do not seem to be on this one other than saying laissez-faire. Which is not about to happen.