Nasdaq: Issuers need a voice in US market reform debate

Author: Danielle Myles | Published: 14 Nov 2011
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New issuers have been overlooked in the US equity market reform debate, but volatility is a bigger concern for them than the market being down.

Nasdaq OMX has been talking to would-be issuers about market structure and who is providing liquidity, the exchange's executive vice president of transaction services, Eric Noll told delegates at Sifma’s annual meeting on November 7.

“Issuers are an unusual category of market participants and one that we as an industry probably don’t spend a lot of time addressing, and probably should spend more time talking about,” he said.

Last year’s so-called flash crash and the August volatility have steered these companies’ focus to market structure. “It’s something that CFOs have not spent a lot of time in the past worrying about, but they do spend a tremendous amount of time worrying about it now,” said Noll.

Unstable markets are a bigger deterrent to initial public offerings (IPOs) than the sluggish market. “Volatility has been the biggest issue, even more than the market being down,” said Michael Kaplan, co-head of Davis Polk & Wardwell’s global capital markets group.

The US IPO market effectively shutdown in August following the month’s record price swings. No company was willing to take the risk following the Dow Jones closing 400 points either way for four consecutive days.

“It makes it very hard to do a deal and get a price as you don’t have the confidence, particularly with an IPO which can be marketed it for up to two and a half weeks, of what is the market will look like during that period,” Kaplan said.

Since the volatility dampened around three weeks ago some IPOs have launched and there are now a number in the market; nine this week  according to the WSJ.

Noll said small-cap companies looking to list have the biggest concerns, and are anxious about how liquidity is provided outside of the top 100 names. Nasdaq is speaking with them on how to make exchanges a better way to raise capital.