NYSE Euronext said Wednesday that it would cut some transaction costs and shrink the trading floor at the New York Stock Exchange to the size last seen in 1969, after its share of the U.S. equity market dropped to a record low.
Brokerages will be able to execute some trades at the Big Board at no cost and will receive higher payments for sending orders to the NYSE Arca electronic market, the company said. The exchange will close two of its four remaining rooms as increased automation allows brokerages to process more shares with fewer floor traders.
Although NYSE Euronext President Duncan Niederauer has created incentives to lure trades back to the exchange, the NYSE's market share fell to an all-time low of 42.7% in July after losing almost 7 percentage points since 2004.
Chief Executive John Thain in April hired Niederauer, a former colleague at Goldman Sachs Group Inc., to try to recover lost business.
"This is doing whatever they can in the hope they can retain a certain level of market share," said Sang Lee, a managing partner at Aite Group, a Boston-based consultant to brokerages and institutional investors.
"We will continue to see downward pressure on pricing levels. When everybody is fighting for market share, the first thing that gets hit is pricing."
NYSE Euronext fell $1.59, or 2.2%, to $69.45. The stock has posted the worst performance this year among 22 publicly traded exchanges worldwide, according to Bloomberg data.
The shares have dropped 29%, compared with a 26% gain for the FTSE/Mondo Visione Exchanges index that tracks 18 publicly traded exchanges around the world.
The exchange faces mounting competition from Nasdaq Stock Market Inc., as well as newer electronic markets such as Bats Trading Inc. and International Securities Exchange Holdings Inc. Nasdaq, the second-largest U.S. stock market, cut transaction costs this year, narrowing the gap in trading volume with NYSE Euronext.
Nasdaq said Tuesday that it handled 30.4% of the shares that changed hands in the U.S. last month, matching its record high. Bats, which started trading in January 2006, is spending as much as $10 million this month in a promotion to draw orders on NYSE-listed shares. NYSE Euronext's share of all U.S. trading climbed to 43.5% in August from a month earlier.
NYSE Euronext is seeking to capitalize on its two markets, which offer brokers the speed of automated transactions on Arca and the potential for handling larger orders through floor traders at the Big Board, Niederauer said. The new fees won't affect revenue at the NYSE, he said.