Ask the big stock exchanges about new IR services or tools they’re bringing out, and they’ll reel off a list of planned improvements, partnerships or launches. Some think providing services as part of the listing fee is the way forward, others insist they should be kept separate. With increased competition between exchanges, their attitude toward IR services could be a crucial differentiator.
At NYSE Euronext, key IR products on offer to listed companies include NYSEnet, which gives information on trading, investors and peers; eGovDirect.com, a password-protected website containing governance information; and a variety of ways to interact with investors.
The merger with Euronext will bring changes, explains Noreen Culhane, executive vice president of the global corporate client group. ‘We’re currently analyzing NYSE Euronext’s password-protected sites,’ she says. ‘Ultimately we’d like to have one site that any of the four trading platforms under NYSE Euronext could use.’
NYSE Euronext includes its IR services as part of its listing fee, something Culhane says companies are happy with. ‘Other exchanges have acquired IR services firms and sell things like directors’ and officers’ insurance, but we’re different,’ she adds. ‘We’ve done a very careful job of selecting the services we offer.’
A new part of the NYSE Euronext family is news distribution firm Hugin, acquired by Euronext in December 2006. According to Tor Baekkelund, CEO of Hugin, stock exchanges and the IR services providers in Europe are conscious of the attention and discussion surrounding the Transparency Directive (TD).
Although the TD does not officially state that exchanges need to keep regulatory and profit-generating services separate, the Committee of European Securities Regulators and the European Commission have both advised that stock exchanges should do so – and that no competitive advantage should be allowed. ‘Euronext-listed companies won’t be getting different services or price benefits from us as the whole aim of the TD is to create a fair market for the benefit of issuers,’ explains Baekkelund.
Business Wire has an affinity marketing partnership with the NYSE, announced in May, where listed firms receive certain free services and are entitled to incentive pricing arrangements on others, says Neil Hershberg, senior vice president of global media at Business Wire. ‘It’s not a question of bundling in,’ he insists. ‘We like a level playing field where all service providers have access to companies and the exchange-owned services are not operating from any position of advantage.’
In the headlines
A flashpoint arose with NASDAQ’s proposal last year to bundle in IR services with a listing fee increase. The response was reported as ‘an uproar’ and ‘a major embarrassment’ as antitrust and conflict of interest issues emerged, although in reality the SEC received 65 comment letters in favor and 66 against. Some of the negative letters accused NASDAQ of allegedly illegal tying arrangements and other antitrust violations and potential conflicts of interest.
According to the SEC, as NASDAQ removed the bundle of services from the proposed rule change, these issues are now moot.
The Securities Industry and Financial Markets Association is following the developments between exchanges and IR services, according to spokesperson Travis Larson. ‘As for-profit entities, exchanges face new pressures to boost their bottom line, so they have to look for new profit-making areas,’ he explains. ‘This can cause conflicts of interest and we have been watching the situation closely.’ NASDAQ, in particular, has been active in looking for new ways to enhance its range of services. As well as the high-profile acquisitions of PrimeZone Media Network (now called PrimeNewswire) and Shareholder.com, in the last couple of years NASDAQ also acquired the NASDAQ Insurance Agency, created the Independent Research Network in a joint venture with Reuters, and bought management liability insurance specialists Carpenter Moore.
Some of NASDAQ’s other key offerings include Market Intelligence Desk, which gives real-time reports on stock trading; the CEO Signature Series, where interviews are posted on NASDAQ.com; Boardrecruiting. com; Directors Desk, a board workflow tool; and – being rolled out this month – Pinpoint Market Intelligence, a stock surveillance service.
‘I think anyone making a listing decision today would look at the marketplace and say there is added value at NASDAQ,’ comments Marcia Barris, senior vice president of products and strategy in the corporate client group at the exchange. ‘There’s certainly a trend for exchanges to be more involved in IR but I don’t think anyone’s doing it to the extent we are.’
For the Toronto Stock Exchange (TSX), which acquired IR firm the Equicom Group in June and formed a strategic alliance with Thomson Financial last year, there is a distinction between the exchange and its IR services.
‘Equicom continues to operate at arm’s length, and we’re not going to bundle its services with our fees or offer any discounts to TSX issuers,’ notes Richard Nadeau, a senior vice president with TSX Group. ‘We want to leave some functions of the exchange on one side and IR services on the other.’
According to Barry Hildred, president of Equicom, one benefit for issuers of having more IR services via an exchange is that it creates a one-stop shop. ‘Issuers are looking for a trusted supplier as opposed to managing multiple vendor relationships,’ he points out. ‘People find it very attractive to have one point of contact.’
Eric Warner, senior vice president of global business development for Thomson’s corporate services ‘ We want to leave some functions of the exchange aside’ Richard Nadeau, TSX Group segment, sees other benefits. ‘Having a service element in the relationship gets exchanges more integrated with their clients and their business operations,’ he says.
At the London Stock Exchange (LSE), services – which aren’t bundled in with fees – include the newswire RNS, website creation, and capital market days where companies can present to investors. ‘The products are all in areas where we can make a difference for issuers,’ notes Simon Wilkinson, head of RNS and IR Solutions at the exchange. ‘In London, companies are well serviced by external IR parties, so we’re very focused on what we offer. RNS is profit-generating, but it’s not a major strategic aim of ours to grow an IR stream in the same way NASDAQ is doing.’
The LSE previously offered other IR services, although these are no longer available, as Wilkinson explains: ‘Some activities were introduced with third parties in areas such as perception research and global shareholder ID, which have been discontinued. There was limited demand, so we felt it better to leave those services to third parties and focus on areas where we can fill a gap for our clients.’
No guarantees
As Mark Hynes, managing director of IR at PR Newswire, points out, the reputation of even a major exchange does not guarantee it success in the IR services field. ‘The branding of an exchange doesn’t mean companies feel it will offer a better service,’ he notes. ‘I don’t believe any firms think, Thank goodness, finally the exchanges are offering these services.’
Marketwire had a preferred provider arrangement with NASDAQ, but currently has no formal ties to any exchange. ‘There’s intense loyalty from clients toward their service providers,’ adds Thom Brodeur, Marketwire’s senior vice president of global strategy and development. ‘We find clients tend to use the services they’ve always used, regardless of whether something else is bundled with their listing fee or affinity-marked by their exchange.’
That may not be good news for exchanges, but it is good news for issuers. As exchanges fight to establish themselves in the IR services world, increased competition should mean exchanges offer an ever-longer list of enhanced services and innovative new launches.
