Comments for Robert Greifeld
President and CEO of NASDAQ
Tsinghua University – November 30, 2005
Thank you, Prof. Liao, for such a gracious introduction. I am honored by this opportunity to visit one of the world’s great universities and open a dialog with the future leaders of China.
Throughout NASDAQ’s thirty-four year history, we have always looked to the future, to the markets of tomorrow and to countries like China, where we have had a presence for eight years.
Today we are extremely pleased to have 24 Chinese companies listed. Eighteen of them have come to NASDAQ in the past two years and they have a combined market cap in excess of $15 billion. We are particularly proud that, in 2005, we have listed all eight Chinese companies that have come to market. NASDAQ provides high visibility to global investors, and a highly liquid trading platform for Chinese companies. Today we trade an average of approximately 14 million shares per day of Chinese companies, compared to just 2 million shares per day for our primary competitor. And one reason I am here is to assure you that we are working very hard, every day, to build on that success in the future.
Given the caliber of the Chinese companies we list and the stellar reputation of this university in key areas like business, science, and engineering, I naturally assumed there must be Tsinghua alumni serving as CEOs of NASDAQ-listed companies.
And indeed that is the case: four of our companies are headed by Tsinghua graduates: Mr. Charles Chaoyang Zhang from Sohu.com [SOHU], Mr.Raymond Yang from Linktone [LTON], Mr. Wang Leilei from Tom Online [TOMO] and Mr. Zhou Yunfan from Kongzhong [KONG].
I’d like to use this visit to do three things: first, I want to tell you about the magic of NASDAQ … why I am so proud to be associated with the stock market … and why I hope the budding entrepreneurs at Tsinghua University will consider listing with us when the time comes to take your companies public – hopefully in the not-so-distant in the future. Second, I’d like to tell you what NASDAQ is doing to bring greater efficiency and transparency to markets worldwide. Finally, I’d like to share some of my personal entrepreneurial experience and how it relates to NASDAQ. I also want to leave time for your questions.
I’ve been the CEO of NASDAQ for two and a half years. I honestly believe I have the best job in the world. But one thing I’ve noticed is that many people who should know better still think of us as an index – like the Dow Jones or S&P. They say, “Bob, NASDAQ is having a flat year.”
“Well,” I tell them, “NASDAQ is much more than an index. It is a publicly traded company – and a pretty successful one at that. Our stock has gone from $6 to about $37 this year.” That’s not flat. That’s living the entrepreneurial values we so admire in our listed companies.
I also tell them that NASDAQ is the world’s largest electronic stock market. No other market even comes close. We list about 3,300 companies, with a combined market cap of $3.7 trillion. 10% of our companies are non-American. We are home to category-defining companies that are leaders across all areas of business, including technology, retail, communications, financial services, and biotech. The companies we list range from giants like Microsoft, Intel, Starbucks, and Amazon.com to hundreds of much smaller, fast-growing up-and-comers – the business stars of tomorrow. Our companies vary widely in size, but all of them share an abiding commitment to growth, innovation, and the entrepreneurial spirit. It’s in our NASDAQ DNA.
On a typical day NASDAQ will process 7 million quotes, 3 million trades, 2 million orders, and 1.75 billion shares. That’s more share and transaction volume than the next two US exchanges COMBINED. Our network takes in data from more than 350,000 terminals around the world, processes up to 15,000 transactions per second, and delivers data throughout the nation within 200 milliseconds.
I realize that’s a lot of numbers to throw at you. But those numbers are important. They are part of our story, a sign of our success. They give you a sense of why we are the market leader and why we are the best at what we do.
But you won’t find the true magic of NASDAQ in the numbers. You will find it in the minds and aspirations of millions of entrepreneurs and engineers in every corner of the globe … dreaming and working … planning and sacrificing … building their businesses, …sharpening their ideas, and bringing them to market. For the very best among them, the culmination of their dream will occur on the day they take their company public on NASDAQ and experience the ultimate moment of success in the marketplace.
NASDAQ is the symbol of success. It is an international brand that translates worldwide to growth, risk-taking and innovation. We are the home port for the entrepreneurial spirit of the world … And that is our strongest asset of all.
When NASDAQ was founded in 1971, markets in America still operated on a 19th century model. The Exchange was a club steeped in tradition and mired in inefficiency. There was a trading floor, a cozy club of market makers, and scores of people running to and fro in colored smocks, gesturing wildly in a bizarre dance trying to match buyers and sellers. Stocks were denominated in fractions, spreads were generous, transactions were slow, and transparency was hard to come by.
NASDAQ changed all that. All of a sudden the world had its first exchange that did not have a physical floor. All of a sudden the world of commerce had a market totally dedicated to efficiency, transparency and the intelligent use of technology to further stock trading.
Back in 1971, electronic trading was seen by many as a radical idea. But 34 years later, look around the markets of the world, and what do you see? Every stock market in every major country has followed the path blazed by NASDAQ. The only remaining floor-based market on the planet is our competitor in New York.
The consequences of electronic trading have been profoundly good for the investor and good for the markets. Before NASDAQ, the potential investor had no choice but to trade into a sellers market. The people filling your order also made the rules. If you didn’t follow their rules, you couldn’t play the game.
Electronic trading put the tools directly in the hands of the investor. It transformed investing --worldwide -- into a buyers market. It enabled us reduce trading costs to market participants by 50%. The technological expertise we developed also put us in a position to adjust much more successfully when decimalization came to American markets three years ago.
Transparency stands out as an equally important benefit of electronic trading. Our investors have the ability to see all trading activity at all times. We do not empower any intermediaries to have hidden information. Our listing standards are fair. They are objective. They are transparent.
Market transparency builds trust, and trust is the oxygen of the marketplace. Our fundamental responsibility is to ensure that investors believe in the soundness of our markets. NASDAQ is committed to providing the best, most efficient, most transparent trading and regulatory platform in the world.
We are proud of what we have achieved since 1971. We have created the electronic marketplace that has become the standard for world commerce. We have become the industry leader in transparency and efficiency. But NASDAQ also understands that we can only attract the companies and investors of the future if we continue to innovate and lead.
Let me share with you just a few of the things we’re doing to build on our success, stay ahead of the competition and earn your business. For starters, we’re restructuring and cutting costs – by $300 million since I became CEO in 2003.
Our announced intention to acquire INET for $935 million is a major step forward in our strategic repositioning. It will open up even greater opportunities to grow our market share of NYSE-listed shares. And I can tell you that is a major priority – a major growth area – for us. We have the technology in our Market Center to make it happen.
NASDAQ and Reuters together are also starting to roll out a brand new stock research service through a company called Independent Research Network. It will be available here in China, and we’re very excited about this initiative. Many of our CEOs are desperate for research coverage. You may be surprised to learn that half of all public companies are followed by two or fewer analysts. Today demand for research clearly outstrips supply, and NASDAQ is moving to fill that void.
We’ve started a research joint venture with Reuters. The listed companies will pay a direct fee to that joint venture. To address any concerns about objectivity, we will rely on a panel that will set criteria and standards for the research firms that will be assigned to write coverage on the company using the service. We just announced this initiative, and the response has been encouraging. We’re not worried about having customers.
I could go on about innovation at NASDAQ. I could tell you about our acquisition of a large D&O insurance broker or some of innovative things we’re doing with technology. But I realize that can get a little dry and boring. So I will take a big risk and close instead with a few comments about a subject you may find even more dry and boring: Bob Greifeld and what brought me to NASDAQ.
Sometimes I feel like I’ve spent my whole life in training for this job. That training began when I was in high school and awoke one morning to the realization that college was on the horizon. If I wanted to go, I would have to earn the money to pay for it. So I quit the track team and went to work at the local grocery store where I learned my first business lesson: stock the oldest, stalest merchandise out in the front row so you won’t be stuck with bad inventory.
I helped my dad with his landscaping business. I worked as a security guard on the midnight shift. I worked forty hours a week during my senior year in high school. I paid for my tuition at a small Long Island college from my savings and with scholarships. During the summers I always worked two jobs.
After graduation I worked at a company called Burroughs where I earned $13,000 a year. I worked a second job at Fed Ex delivering packages so I could buy my future wife an engagement ring. I never had a master plan, or a clear idea of how things might work out.
I went back to school and got a Masters Degree in Business from New York University. I actually wrote my graduate school thesis on the operation of the NASDAQ stock market – never dreaming that one day I would be running that operation.
I spent the next two decades working with electronic trading systems and that gave me a key credential for this business: I actually understand how the electronic marketplace functions. I have been intimately involved with it for my entire career.
At SunGard Data Systems, I was responsible for all of their sell-side businesses and its buy-side transaction routing. When I was President and CEO of Automated Securities Clearance, Inc during the nineties, I led the team that created BRASS and made it the industry standard trade order management system for NASDAQ stocks.
It has been enormously exciting and rewarding to take that practical experience and use it to strengthen NASDAQ’s reputation as the largest, most efficient and most transparent market in the world. And in the process I’ve also found time to go back to the track I left and high school and become a marathon runner.
I mentioned earlier that the real magic of NASDAQ is not the numbers or the speed or the technology. What sets us apart is the central role we play in the dream of entrepreneurial success worldwide. I believe that dream is best expressed in the words of those who have lived it. So, before taking your questions … and before thanking you formally for the honor of appearing at Tsinghua University … I’d like to take just a moment to show you a short video that lends words and meaning to NASDAQ’s special place in the entrepreneurial spirit.
Thank you again. Now, I would be happy to take your questions.