Few U.S. traders pledge allegiance to Nasdaq’s NYSE bid

By Ryan Vlastelica

NEW YORK (Reuters) – U.S. stock traders rejected a patriotic pitch from the Nasdaq and IntercontinentalExchange to keep the New York Stock Exchange in American hands and saw greater benefits from a tie up with Germany’s Deutsche Borse.

Nasdaq OMX and IntercontinentalExchange on Friday bid $11.3 billion to buy NYSE Euronext, trumping an earlier offer by German exchange operator Deutsche Boerse.

Traders said a tie-up with Deutsche Borse was better in part because of its reach into other securities markets.

Many traders expect Deutsche to make a counter-offer.

“My sense from a twenty-first century point of view is that I think the Deutsche Boerse merger creates much more of a true global stake than Nasdaq and the NYSE does,” said Kenneth Polcari, managing director at Icap Corporates, who trades on the NYSE floor. “From a true global perspective the Deutsche Boerse is probably the better option.”

Nasdaq Chief Executive Robert Greifeld and ICE’s Jeffrey Sprecher backed their bid with an appeal that the United States remain the world’s financial center.

Traders were less clear on the benefits of a domestic partnership in a globalized economy and an industry where consolidation is considered inevitable.

“The DB deal may be better because of the higher degree of derivatives trading there,” said Todd Schoenberger, managing director at LandColt Trading in Wilmington, Delaware. “For creating a complete global trading technology, the DB deal would be better.”

For Nasdaq, the deal would expand its core, albeit low-margin, stock-trading business and could dominate other U.S. options markets. But it could raise questions for shareholders aware that the other exchange mergers are driven largely by a desire to diversify into more profitable derivatives trading.

Some in the financial sector did not want a foreign stake in the New York Stock Exchange.

“As a trader here in the U.S. I’m all for keeping things domestic,” said Michael Nasto, senior trader at U.S. Global Investors Inc, which manages about $3 billion in San Antonio.

There is an emotional component to the prospect of Deutsche Boerse buying the venerable Big Board, an iconic symbol of the U.S. economic system.

Investors, regulators and U.S. lawmakers expressed dismay at the idea of the exchange being enveloped by a foreign company when that offer was first announced in February. Even Duncan Niederauer, the CEO of NYSE Euronext, said it’s “an emotional decision for everyone” when the offer was unveiled.

But traders used to dealing with customers across borders didn’t seem swayed by remarks from ICE’s Jeffrey Sprecher, who said this tie-up could help the U.S. “change its current course.”

“The idea that it would be patriotic to have the Nasdaq deal is mostly window dressing, in my view. I don’t think it’s really impacting the way people think about the deal,” said Schoenberger, who said the Nasdaq offer would be viewed by traders as “more a hostile takeover.”

Joseph Cangemi, chairman of the Security Traders Association in New York and a shareholder and member of NYSE Euronext, said from a “trading standpoint and a nationalistic standpoint, I’d look to a domestic entity that could provide overall market coverage as more advantageous.”

However, he said such a combination would “dramatically reduce competition…which I’m concerned about from a Security Traders Association standpoint.”

Nasto added that while he would prefer a Nasdaq deal over a Boerse one, as a trader either would be preferable over no deal.

“With any kind of merger there will be greater transparency,” he said, “and the more transparency for trading, the better it will be for me.”

(Additional reporting by Ed Krudy; Editing by Andrew Hay)

Few U.S. traders pledge allegiance to Nasdaq’s NYSE bid