NYSE pulls plug on NASDAQ OMX Corporate Solutions
The New York Stock Exchange has warned its largest listed companies that it will stop subsidizing IR services from NASDAQ OMX, which bought Thomson Reuters Corporate Services earlier this year. The announcement came in an email Friday that was obtained by IR Magazine.
The move affects hundreds of companies that have been getting up to $70,000 a year each in surveillance, analytics, press release distribution or website hosting from the former Thomson division, all paid for by the NYSE. With the clock running out at the end of January, they have less than four months to switch vendors or start paying for those services themselves.
Since 2011 the NYSE has been subsidizing IR services from different vendors for its largest issuers while newly listed companies get freebies for up two years. Around 500 companies are said to benefit, including over 400 using what had been Thomson Reuters Corporate Services before NASDAQ closed its $390 mn acquisition of that business in June. A rough calculation puts the total subsidy at $60 mn a year.
‘For vendors remaining in the subsidy program, it’s a huge change in the landscape that hopefully will mean winning a lot of new clients,’ says one rival vendor among the remaining 10, speaking anonymously so as not to harm his relationship with the NYSE.
NASDAQ and its customers appear to have suspected the NYSE would cut them off following the Thomson acquisition. In an email from NASDAQ Corporate Solutions to NYSE-listed clients later on Friday, also obtained by IR Magazine, NASDAQ said it had been negotiating with the NYSE for several months to remain in the subsidy program.
The NYSE's email says it continually evaluates vendors and services for the subsidy, part of its ‘issuer services program’, and that the decision to boot out NASDAQ came from that evaluation process. It emphasizes that issuers don’t have to switch, and can continue using NASDAQ services on a non-subsidized basis. ‘Issuers who wish to continue receiving the NYSE subsidy after January 31 will need to switch to one of the other services from our full suite of partners,’ the email reads. The NYSE did not respond to IR Magazine’s request for comment.
The NYSE’s move is the latest gambit in the heated competition for listings. The exchange will no longer have to cut a seven figure check to its arch rival every month while knowing its largest issuers have NASDAQ customer reps. ‘The fox was in the NYSE’s henhouse,’ says the unnamed vendor.
‘The challenge now for issuers is they have to migrate to other platforms, both their desktop analytics tools and website hosting. That’s a big hassle,’ says Enzo Villani, CEO of Sustain Integrated Communications in Lake Placid, NY, who set NASDAQ on the path of acquiring IR services while there from 2001 to 2006. He went on to help MZ Consult and King Worldwide build their stables.
Villani says having the NYSE subsidize IR services strongly influences the market, including keeping prices down. Cutting off NASDAQ ‘is a great opportunity for other vendors. It may put pressure on issuers, but it really opens up the market.’
Website hosting firms like Brazil’s MZ Consult, Canada’s Q4, UK-based Investis, Business Wire, PR Newswire and SNL Financial stand to pick up clients, though companies may choose to soak up the $12,000 to $16,000 annually that the NYSE contributes for web hosting instead of switching.
The biggest beneficiaries will be firms in the subsidy program offering analytics and surveillance, which have a higher price tag. Ipreo’s BD Corporate is the obvious alternative to NASDAQ's Thomson ONE desktop product, though Bloomberg and FactSet will also be vying for ex-Thomson/NASDAQ customers. Ipreo is owned by NYSE-listed Kohlberg Kravis Roberts.
‘It’s going to be a battle over tens of millions in revenue, so they’re going to go all out,’ Villani concludes.
Update October 10: The second to last paragraph was edited to make it clear that only vendors in the NYSE's issuer services program would win clients wanting to keep the NYSE subsidy.