Partner Article

Snags ? What is the Going Rate?

A bad few days for equity markets around the World. Not only because of the continued poor performance of equity indices, especially in the Eurozone but also due to system futures.

The price which NASDAQ evidently agreed to pay to compensate brokers for losses arising from a system malfunction or “glitch” is $40m. A “glitch” in this context could mean “mishap” or “snag”.. So it is wrong to assume that a word which in ordinary use conveys a small or inconsequential matter does not have a substantial price tag.

NASDAQ worked hard to attract new technology entrant, Facebook to list on its platform. A triumph for NASDAQ which was pushed hard by the NYSE in the race to sign Facebook’s listing.

However, at the opening bell on the first day of dealings in Facebook shares traders were left “blind” due to technical problems. Some of the larger international trading firms are reported to have suffered losses of $100m as a result. In the light of the fall in the price of Facebook’s shares which as at 6 June were down more than 30% the “glitch” has become a regulatory investigation involving the SEC.

The next piece of disappointing news was that UK based Stock Exchange “PLUS” was sold for £1 to ICAP Holdings. PLUS markets considered itself to be a next generation stock exchange which operated both a “regulated market”, derivatives exchange and an unregulated smaller cap market.

ICAP is the world’s leading interdealer broker and operator of electronic trading platforms. ICAP is probably attracted to the PLUS because of its “Recognised Investment Exchange”. Regulation of Over-the-Counter or “OTC” trades requiring transparency of volumes, terms and prices is increasing. The result, such trades are being driven towards open trading platforms such as that operated by PLUS. Rather like the business which produces cars buying the business which operates the car show rooms, this vertical integration of product and market creates competitive advantage.

Finally, the London Stock Exchange saw its third and fourth largest shareholders sell-out. Italian banks, Unicredit and Sanpaolo which together held 11.5% of the LSE’s shares sold at 960p per share - towards the bottom end of pricing expectations. The Italian banks no doubt had domestic reasons to pursue a sale rather than this being a verdict upon the LSE’s business prospects. However losing two large and supportive shareholders in one day at a “keen” price is not helpful.

So a bad week for companies named with initials, e.g. NASDAQ and the LSE.

This run of poor Businesses christened with just initials continued. The Advertising Standards Agency notes in its 2011 Annual Report that a 2005 “KFC” advert featuring call centre workers enjoying KFC meals whilst trying to talk was the most complained about advert of all time.

This was posted in Bdaily's Members' News section by Tim Stocks .