NYSE Euronext says any new rule related to short selling should be similar to the old so-called bid test, a type of “uptick rule” that only allowed shorting at a price above the highest available bid.

Short selling is a trading practice some see as harmful to markets because it benefits from falling stocks.The SEC, which issued five rule recommendations last month, is now accepting public comment letters. CEO Duncan Niederauer, speaking at the 2009 Reuters Global Exchanges and Trading Summit in New York, says “We and most of our constituents think (the price test) should be applied all of the time, not just some of the time, So I don’t think our comment letter will talk about a circuit breaker concept.” In March, NYSE Euronext signed a joint letter with other top U.S. exchanges, including the Nasdaq Stock Market, urging the SEC to adopt a circuit breaker and a “modified uptick rule.

Presenter: Fred Katayama New York

Speaker: Duncan Niederauer CEO, NYSE Euronext

Nasdaq OMX Group, the transatlantic exchange operator, says it expects to work hard this year to try and lure new companies looking to list publicly even as competition among exchanges continues to rise.

President Magnus Bocker, speaking at the 2009 Reuters Exchanges and Trading Summit in New York on Tuesday, says “the IPO pipeline looks very interesting” especially for financial services firms where investors could see “both new startups but also some spinoffs from traditional banks and financial services companies.”

Speaker: Magnus Bocker President, NASDAQ

Presenter: Conway Gittens New York

Never before have exchanges undergone the heavy trading volumes, severe volatility, and intense scrutiny brought on by the global market crisis that began in earnest last year. Emerging from a period of blockbuster mergers, the largest market operators have so far run with few problems as investors worldwide rushed to sell securities. While the volatility could mean a short-term trading bonanza, the industry is also keeping a close eye on politicians and regulators considering sweeping changes that could mean new restrictions on capital markets and its growing ranks of participants. Some exchanges could take advantage as over-the-counter products such as credit derivatives, demonized by some for their role in the crisis, are pushed on to transparent clearinghouses.

Meanwhile, traders have hung on as roller-coaster markets forced them to reevaluate and even abandon some long-held investment strategies. The growing prominence of computer-based high-frequency trading has driven volatility to record highs, and accounts for record trading volumes in U.S. stocks despite a recession that has toppled some of the biggest financial firms. With ever faster technology, dark pools and other alternative venues have proliferated and intensified pricing wars meant to attract investors, who are bruised by the selloff and sensitive to trading costs. 

CEOs and other top names will discuss these and other topics in a series of closed on-the-record interviews at the Reuters Exchanges and Trading Summit, to be held in New York and London on May 11-13, 2009. The Summit will generate a series of exclusive interviews and articles, regular blog postings and online videos.

“Well insulated” China, though suffering from sharp drops in its own equities markets, doesn’t have the sense of crisis that exists in the U.S., says Philip Partnow, managing director of UBS Securities Ltd in Beijing. UBS, the first Western bank to assume management control of a domestic mainland brokerage, points out the fact that what’s hitting companies is not subprime-related securities gone bad.

“I think there’s nothing here we feel is toxid,” he told Reuters on Wednesday at the Reuters China Summit in Beijing. He goes on:

“The Chinese capital market has responded quite differently than global capital markets and that is because the Chinese capital markets are still pretty well insulated by the way China controls the RMB and by the other financial controls that China has.

“It is true that both the Shanghai A-share market and the Heng Seng market have fallen quite steeply, but that is more in response to a correction from what many people believe was an over-inflated stock bubble, rather than a direct response from some financial crisis or concern. That’s been then followed on by some concerns that people have about a weakening economic sentiment in the U.S. and Europe and Japan, which are China’s key export markets, and what the knock-in impact will be in China. So there is also a fundamental concern.”

“But there is not a sense of distress or of crisis, or that things that people thought were valuable suddenly vanishing into thin air, along the same lines of what we’ve seen with some of the things that were happening with Subprime and the complex structures that were set up around the subprime, back in the United States. So I think there’s nothing really that we feel that is toxic, out here in China, so we are broadly comfortable with the businesses that we’re in. “

By Lucy Hornby

David Harris, the president and chief executive of CBOE’s relatively new stock exchange, says that in the race to New York, Chicago-based options traders will never beat out New York-based options traders looking to hedge the liquidity they just provided.

Harris, who bikes to work every day, uses an automotive analogy to make his point: “If my Ferrari and your Ferrari are here, but I have to run an extra hundred yards to jump in my car (before) I race to a point, and you’re literally standing right next to your car, I’m never going to win.”

    The traders in Chicago need an equity market where they know they can compete with traders on the U.S. East coast — and Harris said the CBSX is that market.

    He told the Reuters Exchanges and Trading Summit that technology will never completely overcome geography when it comes to the milliseconds of modern trade:   

“The speed of light is the speed of light.”

Despite a widespread movement in the world of stock, options and commodities exchanges to replace floor traders and specialists with computers, that won’t be happening anytime soon with the floor of The Chicago Board of Options Exchange, says William Brodsky, its chairman and chief executive.

Brodsky (pictured at left with U.S. Treasury Secretary Hank Paulson) told the Reuters Exchanges and Trading Summit that the business the exchange does through floor brokers has been stable at about 4 percent in recent years even as total volume has grown.

“It doesn’t mean we’re doing less to automate what we can automate,” he notes.

Brodsky, who says that he expects the exchange to have a physical trading floor “for the foreseeable future,” notes that a special “pit” with 40 or 50 people, most of whom are market makers, accounts for about half of the activity in one of its newest products. Trading in VIX options, which didn’t even exist two years ago, is an example of how  ”we’ve married the best of both worlds,” he says.

Terry Duffy, the chairman of CME Group, which owns the world’s largest derivatives exchange, says he realizes the Merc can be an easy scapegoat at a time when food prices are soaring. When politicians start to talk about the evils of “speculators”, criticism of the main venue where they make their bets on wheat and other crops can’t be far behind.

But Duffy, a long-time livestock futures trader, told the Reuters Exchanges and Trading Summit that he’s used to the exchange being a “political football” and that this is far from the worst case of that happening.

“I remember seeing tractors on LaSalle Street,” which runs through the heart of Chicago’s financial district, when farmers were protesting against excessively low prices in other years, he says. ”I mean, that’s a bad day. That’s when you know people are upset because that gets everybody’s attention.”

The mistake, Duffy says, is to say that the speculator, or the hedge fund, are the root of the problem of the run-up in food prices.  Investors want exposure to agricultural commodities and they are intent on getting it, whether through the CME or elsewhere, he says.

As many as one in five brokers could be off the NYSE floor by year end, according to a prediction from NYSE-Euronext CEO Duncan Niederauer.

    “As we roll out more technology, and we change some of the rules … I think they would need fewer people on the floor. I wouldn’t stand in the way of that, and I could see us just in the main room eventually,” Niederauer said at the Reuters Exchanges and Trading Summit in New York.

The marriage of the CME and CBOT in 2007 appears to be going smoothly but will it’s acquisition of the NYMEX follow the same path?Nearly a year after the CME’s marriage with the CBOT it appears the deal is working. But will it continue to impress as trading volume could potentially decline? Only time will tell. CME Group Chairman Terry Duffy says his focus right now is ensuring the NYMEX offer goes as smoothly as the deal with its crosstown rival.

Ruben Ramirez reports from Chicago.

Speaker: Terence Duffy, Chairman, CME Group

NYSE Euronext CEO John Thain warns that the ample supply of liquidity which is driving the private equity takeover boom won’t be there forever. “Things go in cycles…that’s probably not going to continue forever,” he told the Reuters Exchanges and Trading Summit when asked about the huge supply of capital at low interest rates and credit spreads. He also warned that he saw the greatest risk of a sudden threat to liquidity since the summer of 1997.