NYSE "A Bloated Bureaucracy"

The New York Post ran a piece today about a study HSBC did on the NYSE. My primary observation is that the study fully demonstates the joys of being a monopoly, and points to the disservice done to investors by the NYSE.

First, let's look at NYSE comp ratios:

Nasdaq.....34.3% of revenues
Instinet.....20.0% of revenues
NYSE.......48.7% of revenues

And then there's this gem:

With the proposed spinoff of the 500 person regulatory unit, the study estimated that only 600 of the NYSE's 1,077 employees were necessary. [56%]

It's nice to know that a wholly inefficient labor and cost structure can persist at the core of an institution theoretically responsible for perfect price efficiency.

What a joke!

At least now Dick Grasso can plausibly argue he wasn't an anomaly... - Ed

New York Post: The New York Stock Exchange was labled a bloated bureaucracy that is stumbling into a merger with Archipelago that it doesn't really need, according to a study by an HSBC investment banker.

According to the report, a copy of which was obtained by The Post, the NYSE is not only overstaffed, but has one of the highest compensation cost structures on Wall Street, paying far higher salaries than rival markets.

HSBC released the analysis in late July so three of its clients, private equity powerhouses Bain Capital, Blackstone Group and Texas Pacific Group, could pitch NYSE chief executive John Thain on the merits of an investment.

HSBC proposed buying 30 percent of the NYSE's 1,366 seats for either $3.3 million in cash or $4.1 million in stock apiece.

At the time, this represented a 20% premium to the terms available under the merger proposal.

With the proposed spinoff of the 500 person regulatory unit, the study estimated that only 600 of the NYSE's 1,077 employees were necessary.

The NYSE's compensation cost as a percentage of revenue - 48.7% - was sharply higher than rivals like Nasdaq's 34.3% and Instinet's 20%.  Link