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BOB GREIFELD, CHIEF EXECUTIVE OFFICER, NASDAQ-OMX, IS INTERVIEWED ON BLOOMBERG RADIO
APRIL 15, 2015
SPEAKERS: BOB GREIFELD, CHIEF EXECUTIVE OFFICER, NASDAQ-OMX
TOM KEENE, BLOOMBERG NEWS
MICHAEL MCKEE, BLOOMBERG NEWS
[*] TOM KEENE, HOST, BLOOMBERG SURVEILLANCE: All of you know, all of you worldwide know what Times Square looks like. It is beautiful. It is entertainment. I saw ABC, "Good Morning America" with a big splash.
MICHAEL MCKEE, ECONOMICS EDITOR, BLOOMBERG TELEVISION/BLOOMBERG RADIO: Toys-R-Us --
KEENE: The big Toys-R-Us --
MCKEE: That's your new favorite.
KEENE: You did a great interview with Jon Snow at Toys-R-Us a million years ago.
MCKEE: Yes, it was a while ago.
KEENE: I was in awe of that interview.
MCKEE: That was with the Ferris wheel in the background.
KEENE: Yes, and in the middle of all this is serious stuff. It's about capitalism and about visibility, about Aduro Biotech, which is a new offering for the NASDAQ.
And with us with Robert Griefeld, who I usually talk big picture, 35,000 feel, the Dow. It's wonderful to be in your shop. Your coffee is very good.
BOB GREIFELD, CHIEF EXECUTIVE OFFICER, NASDAQ-OMX: It's certainly great to be in the heat, I agree with you. Every time I see you it's in Davos or outside and we're all freezing.
KEENE: Yes, David Wilson --
MCKEE: Yes, unfortunately he doesn't have the mask on today.
KEENE: That's true. David Wilson, within our equity coverage there, mentioned Intel. How do you keep Intel at the NASDAQ?
Do you fly out there once a year and -- what do you do to keep a juggernaut like Intel in your fold?
GREIFELD: Well, we have over 3,000 companies and we have to make sure that for each and every one of the companies at NASDAQ work with has a tremendous value proposition for them.
What you see here in Times Square is where we help our listed companies get publicity. And we do that quite well. You see all the networks are represented here. We have the outside pavilion for any events. So Intel or others are available to use this facility for them.
But in addition to that, we really focus on making sure that the experience of being a public company and the burdens that come with being a public company are lessened through product and services that NASDAQ uniquely brings to them.
MCKEE: Back when I did that Jon Snow interview that Tom was talking about there were basically two exchanges -- you and the New York Stock Exchange, and your basic business was making markets and facilitating trading.
It is a completely different world now. You've got 11 exchanges, dark pools -- we don't even know how many because it's dark out there, so you have really broadened your business model.
And I sent out on the Bloomberg Radio Plus app the latest stock market chart for NASDAQ and you've done quite well over the last year. But it's not just market trading anymore.
GREIFELD: No, not by any stretch. So we run 22 markets and clearing houses around the world. Our market technology, our software services business is over half a billion dollars per annum in revenue today. So what you classically think of NASDAQ with respect to equity trading is probably about ten percent of our revenue stream.
KEENE: I want to you build trust and confidence here. It's all very slick here. You've got beautiful graphics, lots of young, cut and chiseled dudes walking around doing NASDAQey-like stuff.
Did you read "Flash Boys," and how does a Bob Greifeld respond to the American public's uproar over stuff we don't understand?
GREIFELD: Sure. Well, first, I've said before that I thought that was irresponsible. That book, it didn't represent any degree of research in the market.
What is unique about our markets is every single piece of data is captured and analyzed. And we have right now in the academic community literally 50 to 100 professors who study our market, our market structure, and opine that. And I feel bad for those professors who spent a lot of hard research work on how the markets were really I think productive suggestions in terms of improvement.
KEENE: Can you support a millisecond trading delay that people talk about? I'm not up to speed on this, Bob, but some kind of time delay so the small portion of high frequency trader people don't steal from the American public.
GREIFELD: Well, first I would say you have to recognize that our markets are better than they ever have been. And the cost of transacting in our market is down 90 percent over the last 20 years -- truly remarkable.
KEENE: And Arthur Levitt says the same thing.
GREIFELD: Yes.
KEENE: Full disclosure.
GREIFELD: So what I say, throughout recorded history this is as good as it has ever been. I can't speak for the cavemen era, maybe they had better markets back in that time.
MCKEE: Tom can, he was there.
KEENE: See how he's looking at me? He's looking at me there? Hamilton, who was --
GREIFELD: So the markets can always improve. As good as they are, they can always improve. And certainly we advocate some structural reforms in the market that are under consideration by the SEC.
But you have to understand that these reforms are refinements to a market that is the best on the planet, the best that existed throughout recorded history.
MCKEE: But do you support colocation? Or do you support paying any traders from doing business with you first?
GREIFELD: Sure. So first off, we have our customers who are in our data center -- what we call colocation. What we did back in the early days, back in '06, was make sure the experience was the same for all.
So if you were five meters from our matching engine, you got a long delay call. If you're 100 meters from our matching engine, you got a very short delay call. So we've been doing that back since 2006. So we're fair within a billionth of a second.
So as long as we're providing fair and equal access, everybody has the same price and it is all regulated by the SEC. There are no deals for one customer versus the other. We feel very comfortable that we're providing a service to the marketplace.
MCKEE: There's a five year-old who is working on that billionth of a second somewhere on his computer.
The CEO of BATS suggesting that thinly traded stocks should only trade on their listing exchange. What do you think of that proposal?
GREIFELD: Well, I think it's something we spoke about several years ago, so we obviously support it. We came up with the thought.
And what you have to talk about gets to the broader issue. A lot of publicity about the actively traded stocks, can we make that better. Certainly we can refine it, but it essentially works better than ever.
But the less actively traded stocks today, the market is in some need of fundamental repair, which is not what "Flash Boys" was talking about. I'm saying the real issue is the thinly traded stocks and the --
KEENE: The market maker space of another time and era.
GREIFELD: Yes. I mean it just doesn't exist.
KEENE: So what do we do, Bob Greifeld?
GREIFELD: Well, what we've done in the Nordic, which is very interesting, is we allow the companies to pay the market makers to keep a tighter bid offer spread in the marketplace.
KEENE: Okay.
GREIFELD: That has worked very well with our SME markets in the Nordic, so certainly it's something we recommend here.
I think we have to think more fully about call markets where we run an auction several times a day. And when the liquidity is that thin, it's better to have it centralized a couple of points in the day.
KEENE: Okay. Let's come back and talk about this. This is a huge issue for global Wall Street and, of course, the Wall Street just south of Times Square.
9:10
(BREAK)
9:19
KEENE: Let's rip up the script with our wonderful guest, Robert Greifeld of NASDAQ. Bob, you've been through the games before. Low yields, corporations do bonds and they buy back stocks. You're almost rooting for a low yield environment, aren't you?
GREIFELD: Well, we have a diversified business, so one of the businesses we have is the U.S. treasury trading. And in that environment, the low yield environment has not helped that business model.
KEENE: Okay.
GREIFELD: So we've kind of balanced a hedge. Depending upon which of our business leaders you talk to, some will agree with your first assertion; others will say, no, it's horrible for us.
KEENE: Okay. We were talking on the break about the arch computer of all time, the HP12-C --
GREIFELD: Right.
KEENE: - which anybody in finance had after they had a Keuffel & Esser slide rule ages ago.
You come to the computers today, which is fine, except we didn't bring the American public with them. You are front and center focused on getting the spirit and the belief of being in capitalism back to America.
MCKEE: Well, to the point that you --
KEENE: How do we do that?
MCKEE: -- (inaudible) a school.
GREIFELD: Yes.
KEENE: How do we do that?
GREIFELD: Well, first of all, I would say the situation is not as bad or dire as you are describing. So we see increased retail participation in the marketplace. We do see increased investor interest in the marketplace. And you're seeing that confirmed by some of the volumes you see in the marketplace today.
But tying back to the question, I think it's a constant challenge for us and I think it is part of our responsibility. And as you mentioned, we started the NASDAQ Entrepreneurial Center in San Francisco, which is a public forum for people to come in and understand the spirit of entrepreneurship and what it has meant to the U.S. economy and really the global economy.
KEENE: Is it Vanguard and John Bogle's fault?
GREIFELD: No, not at all. I mean I think you see a rise in passive investing, and I think that's a fine thing. And clearly when you see most active managers over the past decade have had a difficult time outperforming a passive, you're going to see investors respond to those data points.
MCKEE: Well, that has become a business for you. I mean you just announced a new tie up with the KBW indexes.
GREIFELD: Yes.
MCKEE: Your -- part of your business now is offering ETFs, support for ETFs.
GREIFELD: Well, we do. The NASDAQ 100 is obviously the largest. But we have over $100 billion of assets under management. We see that rise, and we're also focused on what we call smart beta. So a passive --
KEENE: What is -- help me here, come on. All the radar is up.
GREIFELD: I'm going to help you. I'm going to help you --
KEENE: What is smart beta?
GREIFELD: - quickly. So you have an index such as the NASDAQ 100, which is a market cap weighted index, and it does what it does. Now, the question is how do you put some intelligence upon those passive indexing products so it edges ever so slightly closer to active but it's more formulaic in terms of how things are looked at.
KEENE: Okay. So what will you do with the Keefe Bruyette and Woods banking desk (ph)?
GREIFELD: Well, that's a --
KEENE: It's iconic. It's great.
GREIFELD: Yes, it is great. So one is we had the technology platform in place to handle the incremental volume with really not a lot of incremental cost. So it's a good benefit to the customers of the products, and obviously us and to KBW.
One of the advantages NASDAQ has is the global distribution. So we can expand quite rapidly the distribution capabilities of those indices, which is important to us. And we're going to work to come up with new and I think interesting indexes around that.
MCKEE: Well, your other business is supporting companies coming to market.
GREIFELD: Yes.
MCKEE: It has been a slow season for IPOs, but we were talking at the break. You're seeing it is starting to pick up.
GREIFELD: Yes. Well, first off, last year was phenomenal, the best year since the year 2000. And really the last 24 months have been incredibly strong.
It is picking up. We have three IPOs coming today and two major IPOs coming tomorrow.
KEENE: You have three IPOs just in the building today?
GREIFELD: Just in the building today -- three in the building today.
KEENE: How do you --
GREIFELD: Two tomorrow.
KEENE: All of our audience wants to know this. How do you decide who does the bell thing at the end?
GREIFELD: It's black magic. And sometimes it's the attention --
KEENE: Lottery?
GREIFELD: It's really --
KEENE: Who roots for the Red Sox? What's the formula?
GREIFELD: If you're a New York Yankees fan, it does help.
MCKEE: Tom is never going to ring the bell.
GREIFELD: So we'll see. So I mean it's really first and foremost first come, first served.
KEENE: Fair. Okay.
MCKEE: You're in your -- well, you're just about to release earnings so if I ask you --
GREIFELD: Yes.
MCKEE: - how much you earned --
KEENE: He's not going to say.
MCKEE: -- you're probably not going to tell me.
GREIFELD: I cannot tell you that.
MCKEE: But, in general, how are you seeing volumes and business through the first quarter? Because we saw a big slowdown in the U.S. economy, and yet stocks continued to rise.
GREIFELD: So I would say this. The bright spot is really our Nordic operations where you saw record volumes and kind of record issuance in the first quarter. So we're very happy to be positioned in that part of Europe.
I think in the first quarter, the IPO activity was strong but wasn't phenomenal. And so we feel reasonably good about that.
And I think the transaction volume, to directly answer your question, in the first quarter was reasonable, but not in any way exceptional.
KEENE: Bob, thanks --
MCKEE: Customers getting concerned?
GREIFELD: What's that?
MCKEE: Customers getting concerned about the length of the expansion?
GREIFELD: Well, I think certainly there will be some. But I think when you look at the IPO activity, the corporate earnings, we think -- you know, you've got to take the currency issue out of it. I think we're in pretty good shape.
KEENE: Bob, thank you so much.
GREIFELD: Appreciate your time.
KEENE: It's wonderful to be here.
GREIFELD: It's wonderful to be heated.
KEENE: Bob Greifeld here at the NASDAQ market site at Times Square.
MCKEE: If it will make you feel better, Tom will wear his winter coat next time we're down here.
KEENE: Yes, we'll do that.
9:24
(BREAK)
***END OF TRANSCRIPT***
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