NYSE Euronext (NYX)

NYSE Group was formed by the merger of three institutions each with a vibrant history of its own - the union of the New York Stock Exchange, Archipelago and the Pacific Exchange. The company, through these market centers, engages in securities listings; providing market-information products and services; and offering various investment vehicles and order execution services

The recent focus of the group is more on companies listing with less concern of the investing community. This might lead to problems dealing with liquidity, which is provided by the institutional clients who are a large chunk of investing community. Moreover the rise in trading fees and removal of caps for payments from brokers wouldn’t matter much to the revenue model as it would be offset by the new revenue sharing agreement with the specialists.

The company has a big disadvantage of not being able to trade electronically, instantaneously and anonymously. However to combat the same it has rolled out a new hybrid market-combining auction based trading and electronic trading for which the amount and the timing of benefit is uncertain. Moreover it is restricting its trading platform to two segments cash and derivatives from its current five segments.

The merger with Euronext is a “merger of equals”, relies on significant cost cuts in the U.S. portion of the franchise and whose benefits in the near future are not visible. The attitude of the management has been to go for acquisitions with a sole motive of achieving sheer size without having any strategic benefit attached to it. The group has its own set of problems ranging from intense competition primarily from NASDAQ, integration challenges and decrease in trading volumes. Though it looks for bond trading and credit derivatives as potential avenues of growth along with the a cost saving plan the future of the bank for the coming year 2007 looks dull with possible hopes of deriving benefits in 2008.