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The transcript from this week’s, MiB: Lynn Martin, President of the NYSE, is beneath.
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BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: I’m Barry Ritholtz. You’re listening to Masters in Enterprise on Bloomberg Radio. My further particular visitor this week is Lynn Martin. She is the president of the New York Inventory Trade, the world’s largest, with over 2,400 listed firms for a mixed market cap of about $36 trillion. She can be chair of the fastened revenue and information providers at ICE, Intercontinental Trade. She started her profession at IBM in International Companies and got here to them with a BS in Pc Science and a grasp’s diploma in Stats from Columbia. Lynn Martin, welcome to Bloomberg.
LYNN MARTIN, 68TH PRESIDENT OF NYSE GROUP: Thanks a lot for having me.
RITHOLTZ: Thanks a lot for becoming a member of us. I’ve so many issues to ask you about, however I’ve to begin out with you have been at IBM just about in its heyday. Inform us what that have was like.
MARTIN: It was nice. I’m going up to now myself a bit bit.
RITHOLTZ: Yeah.
MARTIN: However I used to be there by way of the Y2K disaster —
RITHOLTZ: Proper.
MARTIN: — when world providers was relied upon by clients across the globe to get them by way of that disaster.
RITHOLTZ: Or close to disaster, or nearly disaster. Was it a disaster?
MARTIN: Nearly disaster. It wasn’t. That’s truthful. It wasn’t a disaster, and that I bear in mind waking up on New Yr’s Eve 1999, I’m going to work in a name heart as a result of that’s what you do in your 20s, working at IBM. And we have been watching the Australia open, the clocks hitting in Australia and all the pieces was superb.
RITHOLTZ: Proper.
MARTIN: And we form of knew that after Australia opened okay, we have been going to be okay.
RITHOLTZ: So was this like a close to miss, or was this, hey, rather a lot was made about one thing that turned out to be much less of a —
MARTIN: I feel the trade turned very effectively ready. I don’t know that it was a close to miss, however I feel we acquired forward of a possible problem. There was a technical problem and that computer systems solely understood years in two digits versus 4 digits. So 2000 might have been 1900, and that would have precipitated challenges. I don’t know if these challenges would have been as excessive as was forecasted or not, however I’m actually glad we didn’t discover out.
RITHOLTZ: Yeah. To say the very least. So IBM, I’m form of leaping forward within the story, you started your profession in Pc Science is coding on a Commodore 64. Would you want to clarify that for the youth who don’t know what a Commodore 64 is?
MARTIN: So I bear in mind once I got here house from elementary college in the future, and my dad who was {an electrical} engineer, he used to design gas gauges on airplanes, got here house with this large field. And it was a Commodore 64. I mentioned, “What’s that?” He mentioned, “The primary house laptop.” And I mentioned, “What’s that?” And I used to be a child, I had no concept. And he additionally introduced house a stack of floppy discs, which have been fairly giant for the youth that don’t bear in mind.
RITHOLTZ: They have been actually floppy. They’re not like —
MARTIN: They have been floppy. You could possibly bend them, twist them, regardless of the case could also be.
RITHOLTZ: Proper. Although you shouldn’t.
MARTIN: Although you shouldn’t as a result of your program wouldn’t work if you happen to did that. And I simply turned hooked on it. And as any good child does, you develop into hooked on video video games first. In order that’s actually what acquired me into the Commodore 64.
RITHOLTZ: So is that what led to a deal with information service and laptop science, the straightforward C64?
MARTIN: Properly, what actually led me within the path of learning for my undergrad was my dad giving me actually good recommendation, which was method forward of its time within the early ‘90s once I was making use of to school, the place he advised I not go into the normal engineering self-discipline, however as an alternative go into laptop science primarily as a result of not solely was I good at math and good at sciences, however he mentioned there have been all the time be alternatives for ladies in laptop science.
RITHOLTZ: That’s attention-grabbing.
MARTIN: And it’s one thing that was simply method forward of its time and it sounded good to a 17-year-old filling out a bunch of faculty essays on the kitchen desk. So I ticked off laptop science regardless of, you realize, not having an incredible quantity of expertise with a pc other than enjoying with video video games and fiddling round extra as a interest than something.
RITHOLTZ: And now, you oversee a system that may be a mixture of superior information programs, a lot of {hardware} and software program plumbing. It’s important to hold 2,400 listed firms up and working, buying and selling as a lot as a billion shares a day.
MARTIN: Yeah.
RITHOLTZ: How do you go from the Commodore 64 to that?
MARTIN: Fortuitously, know-how has been considerably superior. And I feel that’s what’s contributing to the volumes of liquidity that you simply really see within the markets, but in addition the quantity of incoming order messages that we see each day.
RITHOLTZ: So if you say know-how, it’s the know-how on the New York Inventory Trade, in addition to the know-how in any respect the businesses which can be buying and selling?
MARTIN: Completely. Completely. And simply macro know-how, I bear in mind the primary courses I took in my CompSci main, I realized meeting language. I used to be coding on a mainframe. I used to be transferring from register 1 to register 2, and that’s like probably the most primary kind. And now, mainframes have develop into actually skinny machines. They’ve actually moved into skinny servers. They’ve moved into storage capability just like the cloud. So the development of know-how, since I completed my diploma within the late ‘90s to the place it’s immediately has actually exploded into one thing that permits for extra performant, extra real-time kind of interactions.
RITHOLTZ: There’s a quote of yours I actually like which in all probability explains your profession, which is, quote, “The quantity of satisfaction I might get once I compiled this system and this system did precisely what I needed it to was past something I had skilled beforehand.” Clarify that.
MARTIN: Completely. So I are likely to view laptop coding not that dissimilar to speaking in a overseas language. Lots of instances you’re studying your French, Spanish to speak with somebody in a special nation. If you’re studying laptop coding, you’re simply studying the way to talk with a machine. And a number of instances if you’re speaking with that machine, you assume you’re telling them one thing actually good and one thing actually optimistic, and what comes out is one thing actually not optimistic. So very incessantly, possibly as a result of I wasn’t the very best coder, I might, you realize, come again with errors or stuff caught in what is called an infinite loop, the place the machine simply retains going and going and going. So these —
RITHOLTZ: Rinse, lather, repeat is a superb instance.
MARTIN: Precisely. It stored doing that. So on the times once I would put, you realize, encode and the machine would do precisely what I informed it to, I used to be like, “Oh, wow, that’s nice.”
RITHOLTZ: So that you used the metaphor of a overseas language —
MARTIN: Yeah.
RITHOLTZ: — verb tense, syntax, punctuation, all these items actually matter if you’re coding.
MARTIN: It positive does. Syntax completely issues, effectivity additionally completely issues. The best way I consider effectivity round laptop coding isn’t that totally different to speaking with an area abroad. They’ve acquired their — you’ve acquired your typical language, you realize, the stuff that you’d study in textbooks, however then you definitely’ve acquired, you realize, the extra shorthand sorts of communication. I sort of view environment friendly laptop coding in the identical trend.
RITHOLTZ: Actually fairly attention-grabbing. Let’s speak a bit bit in regards to the IPO course of, how does this work when an organization decides they need to go public?
MARTIN: So an organization will resolve they need to go public. Usually, they may interview the number of exchanges. That could possibly be home U.S. exchanges. It could possibly be — in the event that they’re a overseas firm, they may take a look at their house markets as effectively. Finally, they’ve a sure goal in thoughts. Do they need to elevate capital? Do they not need to elevate capital? In the event that they need to elevate capital, what investor base are they actually concentrating on?
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MARTIN: As a rule, an organization will choose the U.S. markets as a result of we have now probably the most various, deepest swimming pools of liquidity, the largest entry to traders, the largest alternative for an organization to realize a world following. So usually they may choose a U.S. trade.
RITHOLTZ: So that you guys clearly must prep when an organization involves you and says, “Hey, we’re contemplating you and a few of your rivals.” What’s your course of like to organize for — I don’t know if we nonetheless use the phrase magnificence contest, however that was the outdated funding banking phrase. How do you gear as much as say right here’s why you need to checklist with the NYSE and never our competitor?
MARTIN: So my philosophy may be very targeted on how can we be companion to our listed firms, and what’s that listed firm looking for to attain. And it’s not nearly IPO day. IPO day I sort of equate to a marriage day. You’re going to have an incredible day. However —
RITHOLTZ: Hopefully.
MARTIN: Hopefully. However what I have a tendency to consider is what occurs a month after you go public, what occurs six months after you go public. And the way might we be companion to that agency of their public firm journey?
RITHOLTZ: I really like the visible of this as a marriage day. So now, I’m considering you’ve got mom of the bride, father of the bride. Who’re you working extra intently with? Is it the funding financial institution? Is it administration of the corporate? Who shepherds this alongside?
MARTIN: You’re working with each.
RITHOLTZ: All people, the caterers, the flowers.
MARTIN: Yeah, precisely. Precisely.
RITHOLTZ: The entire thing.
MARTIN: You’re working with the banks who’re underwriting the deal, the mom and father of the bride.
RITHOLTZ: Proper.
MARTIN: I acquired to make use of your analogy. You’re additionally working very intently with the corporate, as a result of the corporate has a imaginative and prescient. The corporate has been profitable, and that they’ve gotten to the purpose the place they’re graduating to the general public markets, which is one thing that must be celebrated. However the firm additionally has a two-year, three-year, five-year technique of what they’re actually looking for to attain, not simply elevating capital to fund operations, or to fund analysis and improvement. They’ve — could have M&A targets. They could need to increase their enterprise by way of leveraging a neighborhood that the listings market, notably the NYSE brings to the desk.
They could have particular issues about sure areas of the market. One matter that CEOs are very targeted on in the intervening time is ESG, environmental, social and governance, and the way they’re bringing sustainable practices to the market. In order that they need to inform that story. So everybody has acquired a special goal. So we spend a number of time with CEO, CFO, IRO, the entire staff, CMO, chief advertising officer, as a result of they’re those which can be, you realize, orchestrating the story a bit.
RITHOLTZ: Proper. So let’s speak in regards to the story a bit. I simply completed watching Apple iTunes’ WeCrashed. And what was so attention-grabbing was as they’re marching in direction of an IPO, it has nothing to do with the trade. It has nothing to do with elevating capital. The narrative simply appeared to have taken over out of your perch. You should see these items go by on a regular basis, possibly not a lot this 12 months, which is a lighter IPO 12 months. However final 12 months, 2020, how do you take a look at these breaking new tales and all the excitement and mania round an IPO for each good and dangerous? How does that have an effect on your job?
MARTIN: Our job is finally to make sure that when an organization involves the market, they get the very best expertise potential when that inventory opens and when that inventory closes first week, first day, regardless of the case could also be. And that they’re proud of the expertise. Finally, if there may be information across the firm, it could affect their resolution to go public at a sure time. Finally the, the corporate that you’re referencing did resolve to go public. It simply was at a special time.
RITHOLTZ: Proper. Somewhat later.
MARTIN: Yeah.
RITHOLTZ: And there have been tales the place that doesn’t essentially work out effectively, or an organization like Fb goes public. The preliminary rollout is a bit dicey. They announce one thing about cellular and out of the blue the inventory takes off. So if you speak in regards to the month or the 12 months after the marriage, these tales actually very a lot change. It’s not simply in regards to the IPO day, is it?
MARTIN: It’s not simply in regards to the IPO day, however that’s in regards to the CEO articulating their technique and executing on that technique. And that’s what’s going to provide the CEO and the general public firm, the subsequent group of traders. They’re going to get a bunch of traders on IPO day. They’re going to do their highway present proper earlier than the IPOs. They’re going to garner the preliminary set of curiosity. And a number of instances, firms will begin that course of even in a gentle method, even earlier than they’re on the highway for the IPO. However post-IPO day, it’s about execution. And once they have actually thrilling information to share, the market tends to reward it. You recognize, extra individuals come into the inventory.
RITHOLTZ: Let’s discuss another methods some individuals take their firms public. We’ve watched SPAC, tremendous widespread final 12 months. All of them appear to have blown up and performed pretty poorly this 12 months. How does the NYSE take a look at a product like a SPAC instead methodology for a non-public firm going public?
MARTIN: Finally, we predict SPACs are nonetheless a viable kind for firms to go public. What you noticed was a flood of SPACs coming to the market on the identical time. So which will have contributed to a number of the challenges which have now occurred, given the time horizon that’s related to SPACs. However finally we see it as a really viable kind for firms to proceed to come back to market. SPACs had been round for in all probability 15 to twenty years and that’s what —
RITHOLTZ: Yeah, because the early 2000, individuals neglect that.
MARTIN: Yeah. And that’s what most individuals neglect is that this was a kind that firms have been utilizing to go public method earlier than the final two years. They simply turned far more widespread within the final couple of years, which is why you noticed the flood.
RITHOLTZ: To say the very least. There’s been a bit little bit of agitation in direction of direct listings, the place there appears to be a good quantity of controversy on each side. How do you guys take a look at direct listings versus the IPO course of? Properly, we pioneered the direct itemizing. We pioneered it, I imagine, three or 4 years in the past. And we’re fairly happy with that innovation.
It’s simply one other innovation permitting for personal firms, on this case that didn’t need to elevate capital, that didn’t want to lift capital, to develop into public firms, to have that public forex, to have the ability to fund their operations and/or to do M&A, and/or all the opposite nice issues that come together with being a public firm, together with offering traders, the chance to take part within the upside related to the corporate.
RITHOLTZ: What in regards to the circumstances the place traders can take part within the upside, particularly a number of these venture-backed firms have stayed non-public for for much longer. They stored doing rounds and have grown to sizes that we beforehand would consider as, hey, they need to have gone public years in the past. How do you guys take a look at that? Is that this one thing that you simply take note of? The place do you assume this goes?
MARTIN: Yeah. I imply, we imagine within the energy of public markets. We imagine within the upside that comes together with being a public firm. Transparency, good governance you get. You’re capable of reward your staff. You’re capable of reward shareholders, permit a various group of shareholders to take part within the upside. And primarily based on the suggestions that we hear from firms who’re non-public, the general public forex continues to be very sturdy. Even if there’s volatility available in the market, there may be nonetheless demand for firms to go public. They’re simply attempting to determine what time is smart for them.
RITHOLTZ: Fascinating. My further particular company this week is Lynn Martin. She is the president of the world’s largest inventory trade, the NYSE. They host 2,400 listed firms, with a market cap someplace within the neighborhood of $36 trillion, doing greater than a billion shares on day. That seems like a fairly complicated state of affairs simply to start with. What’s it like managing one thing with so many transferring components?
MARTIN: There are a number of transferring components. However as a result of I’m a technologist, I really feel actually good in regards to the service that we offer. You recognize, one of many first issues once I hopped into this function in January, unsurprisingly that I targeted on was system capability, and occupied with, you realize, what’s our common response instances? What kind of capability do we have now within the system to deal with peak days? I’m glad I did that as a result of a pair weeks after that, we had great volatility. The week of January twenty fourth, twenty fifth, round then, the volatility —
RITHOLTZ: Which is fairly humorous as a result of the prior 12 months was nearly no volatility. It was the quietest 12 months in a very long time.
MARTIN: We began to see it a bit in December. So we noticed the indicators in December that volatility was beginning to creep into the market. However we hadn’t seen that to your level, you realize, actually because the pandemic. The best way we take a look at capability is incoming order messages. For these listening and coming order messages is purchase is coming into the system, promote is coming into the system, trades taking place within the system. And really rapidly, we began to see days that have been in extra of 20% above pandemic ranges from a messaging standpoint, and it equated to half a trillion messages being processed by our programs each day. So —
RITHOLTZ: Half a trillion?
MARTIN: Sure.
RITHOLTZ: And by messages, it’s purchase, promote and —
MARTIN: Purchase, promote, commerce. Purchase, promote, commerce, that’s it, incoming order messages, which is great. And the truth that we have been processing these with common response instances within the shares of about 30 microseconds was —
RITHOLTZ: Micro?
MARTIN: Sure. Yeah, micro.
RITHOLTZ: Not milli, micro.
MARTIN: Micro.
RITHOLTZ: That’s extremely essential.
MARTIN: Unimaginable. Yeah. And you realize, that basically has continued. It’s been one thing I’ve had my eye on all year long. However our technologists have performed an incredible job. We’ve not too long ago upgraded our programs to our subsequent era matching engine know-how. And our programs have, contact wooden, held up superbly from a response time standpoint.
RITHOLTZ: So when all these items go proper, we by no means hear about it.
MARTIN: Precisely.
RITHOLTZ: However when there’s a bit snafu, it’s entrance web page of the Wall Avenue Journal. Let’s discuss a few of these. Let’s discuss what happened on the flash crash again in 2010. Do we actually know no matter occurred to that, or did simply — and I’m going to provide you guys credit score. These are all outdated information programs.
MARTIN: Yeah.
RITHOLTZ: All the things that existed then have kind of been changed, upgraded.
MARTIN: Properly, I feel in a state of affairs like that, you’ve got seen a market construction evolve too to the purpose the place there have been programs safeguards from a market construction standpoint, put in place round volatility halts, for instance.
RITHOLTZ: Earlier than you go there, let me simply again up a bit bit.
MARTIN: Yeah.
RITHOLTZ: So this was once a reasonably handbook system —
MARTIN: Completely.
RITHOLTZ: — with particular person specialists, human beings —
MARTIN: Yeah.
RITHOLTZ: — at totally different posts on the ground for every particular person inventory. I sort of neglect — having grown up with that, I sort of neglect lots of people are wholly unfamiliar with that. And there was a transition course of the place a number of the handbook processes have been changed with electronics and automatic computer systems. There’s nonetheless people concerned however a lot lower than they as soon as have been. Was that a part of the affect within the flash crash? And the way has that transition occurred? Lots of which happened lengthy earlier than you bought there.
MARTIN: Yeah. It wasn’t essentially on account of anyone explicit space, different than simply an evolution of the market. What I wish to say is probably the most technologically superior firms make use of people, and make use of human interplay. People are there to make sense of what’s occurring available in the market, apply human judgment, take away noise from the system. It goes again to what we have been speaking about very early on, throughout our dialog immediately, which is if you’re writing code, incessantly, what’s going to come back again is an error, as a result of that’s simply the pc reacting mechanically to one thing. In case you don’t have the human who can go in and repair the error, you’re going to stay in an error state. So the human’s job is admittedly to take away the noise from the system, is to take away the volatility from the system.
It’s one thing that I employed in my earlier function, the place we worth $2.8 million securities on the fastened revenue opaque aspect of the market, utilizing a number of nice programs, a number of nice mathematical mouth, and in addition couple hundred people. And the explanation why we have now the very best information set out there may be as a result of I’ve these people who’re all former bond merchants and former muni specialists who could make noise of what’s coming into the system. I feel the ground mannequin is the very same factor throughout actually unstable days. You noticed the human ingredient actually come into play. We noticed two instances much less volatility on NYSE issued shares on the open, 3 times much less volatility on NYSE issued shares on the shut. And that may be a 100% due to the job of the ground.
RITHOLTZ: Actually attention-grabbing. So let’s discuss — so you’ve got shares which can be listed, and a few of that is NYSE and a few of that is Intercontinental Trade.
MARTIN: Yeah.
RITHOLTZ: In order that they do shares. They do bonds. They do choices. They do derivatives. What else — and I don’t know if I left something out, futures. What else is traded at both NYSE or ICE’s household of exchanges?
MARTIN: We even have six clearing homes globally that clear the majority of the credit score default swaps market. As well as —
RITHOLTZ: The place are these six situated?
MARTIN: Across the globe. Across the globe. Our largest —
RITHOLTZ: Like London, Hong Kong?
MARTIN: Yeah. Our largest clearing home relies in Europe. It’s U.Ok. FCA registered. We’ve acquired a clearing home primarily based within the U.S. We’ve a clearing home primarily based in Singapore, in addition to one in EMEA, one in Canada. So we’ve acquired them sprinkled all through the globe.
RITHOLTZ: And a few of that is regional and a few of that is redundancy and backup.
MARTIN: Completely.
RITHOLTZ: It makes an entire lot of sense. So I’ve been speaking — I hold speaking in regards to the NYSE prefer it’s simply the trade. Let’s speak in regards to the NYSE Group.
MARTIN: Yeah.
RITHOLTZ: That’s 4 digital exchanges; NYSE Arca, which is the chief in ETFs; NYSE American Trade; Chicago Trade, Nationwide Trade, plus two choices exchanges, the American Choices and Arca Choices, which I feel one is in New York, one is in San Francisco. Is that proper?
MARTIN: The ground is in San Francisco for Arca.
RITHOLTZ: So how do all — I simply talked about 4 digital exchanges, two choice exchanges. How do all of those combine with the NYSE’s operation?
MARTIN: So frequent know-how is admittedly what pulls the entire exchanges collectively. The totally different medallions are actually there to attempt totally different market fashions, totally different matching algorithms on the choices aspect of the enterprise, totally different market fashions from the fairness aspect of the enterprise. It offers us extra flexibility to have — to be aware of our clients.
RITHOLTZ: Fairly fascinating. So I discussed 2021 was form of aberrational.
MARTIN: Yeah.
RITHOLTZ: At no level within the 12 months was the market lower than 5% from all-time highs, that led to very, little or no volatility within the 12 months. How does a scarcity of volatility have an effect on your every day work, or actually the fitting option to ask that’s when volatility spikes like we noticed this 12 months, does that make your job tougher?
MARTIN: It makes your job totally different. It makes your job targeted extra —
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MARTIN: — on occupied with issues like system capability, response instances, you realize, that tremendous intently since you all the time need to have a really responsive matching engine. You spend a bit bit much less time, although, welcoming IPOs to the market as a result of many firms should not going to need to exit in a really unstable atmosphere.
RITHOLTZ: So this raises an attention-grabbing query. What are you able to guys do to — I don’t know if you happen to can finish volatility, however what are you able to do to tame it or make it extra manageable? Is there something in your buying and selling course of that may facilitate taking a number of the spikes and volatility out of the market?
MARTIN: Properly, that’s the place — that’s the place our market maker mannequin actually resonates. And it’s actually resonating with these firms who nonetheless imagine within the public market forex, which there’s lots of them, once they’re occupied with coming to the market as a result of you possibly can’t predict volatility.
RITHOLTZ: Proper.
MARTIN: Nobody can management volatility. Nobody can predict volatility. However we are able to do issues due to our market mannequin to assist the businesses which can be listed on us, have a much less unstable expertise. So our market mannequin requires a delegated market maker whose job is to commerce that inventory from the ground and so they —
RITHOLTZ: Create an orderly market?
MARTIN: Appropriate. Appropriate, right. They usually clean out volatility, not simply intraday, but in addition on the open and the shut. The open and the shut are extremely necessary moments in time for an organization, notably if you happen to consider an organization having quarter-end, or they’re having the share repurchases, or regardless of the case could also be. In order that’s really significant {dollars}, even put up an IPO, in a CFO’s thoughts, once they’re doing share buybacks, issues of that nature. In order that’s the place our market mannequin actually resonates, notably in instances like this, if you see the volatility available in the market, if you see the VIX over 20, however you realize that firms nonetheless need to exit within the public market.
RITHOLTZ: You recognize, I feel the general public might be much less conscious of a number of the institutional order move, like purchase on open or promote on shut, which it doesn’t harm to have an expert overseeing that course of so it doesn’t get too out of hand.
MARTIN: Yeah. And likewise smoothen any imbalances since you’re not essentially going to have a balanced e book on the finish of the day.
RITHOLTZ: Which suggests they’re actually taking positions —
MARTIN: They’re.
RITHOLTZ: — lengthy or quick with a purpose to fulfill these orders.
MARTIN: Completely.
RITHOLTZ: So let’s discuss some imbalances, and I’m occupied with the form of meme inventory mania that started in 2020, when everyone was caught at house in the course of the pandemic, and simply exploded in 2021. It was actually a really unexpectedly wild trip, particularly the businesses concerned. What was that have like for you watching this? You weren’t but president of the NYSE in 2020 or 2021, however you have been nonetheless there. Inform us what that have was like.
MARTIN: I imply, it was extremely attention-grabbing to observe the brand new retail curiosity in sure shares and why that they had picked sure shares. And I feel it’s simply nonetheless one thing that’s fascinating intellectually greater than something. I can’t actually touch upon any of their selections, nevertheless it’s been attention-grabbing to observe how social media has actually emboldened a brand new class of dealer.
RITHOLTZ: My favourite second of that was the younger — fairly good-looking younger couple. And the best way we subsidize our life-style is we purchase shares. We solely purchase the shares which can be going up. And once they go up, we promote them. And we simply do this time and again from house. And I’m like, oh, I had no concept it was that simple. You could possibly get wealthy buying and selling shares. Why didn’t somebody inform me that 30 years in the past?
MARTIN: I are likely to take the view that having a really balanced portfolio and figuring out what you spend money on, and investing for the long run might be 9 instances out of 10 the — possibly 9.5 instances out of 10, the fitting philosophy to have.
RITHOLTZ: I feel Warren Buffett wouldn’t discover something to disagree with that. And but we see individuals piling to firms of questionable potential. My favourite instance was — was it Hertz that was bankrupt and everyone determined to purchase Hertz since then? In order you’re observing this, is a part of your mind saying we have now to do X and Y and Z to cease this, or is it, effectively, that’s going to be an attention-grabbing finish when that each one — when that prepare stops?
MARTIN: So our job is to ensure the markets are open and can be found to probably the most various set of traders.
RITHOLTZ: No paternalism. You simply —
MARTIN: Precisely.
RITHOLTZ: Right here’s the platform and ensure it runs.
MARTIN: Finally, if there may be questionable conduct, we police that. Our reg group who’s a separate group, polices that and works intently with the regulator.
RITHOLTZ: So let’s speak a bit bit about that. You see conduct that typically it’s simply — that appears fairly silly. And typically it’s like, hey, that is wanting a bit suspicious, one thing doesn’t odor proper right here. What occurs when your programs begin flashing little alerts? Hey, take a look at this inventory, one thing appears to be unkosher right here.
MARTIN: So that might be the job of reg to take a look at varied emblems.
RITHOLTZ: Internally, the NYSE rules.
MARTIN: Yeah. They’re a separate group from the enterprise, however they’re an inside group. After which, you realize, they’d both take enforcement motion if it was suspicious exercise, not silly, not silly. It’s not our job once more to take views on whether or not or not a inventory is price one thing. That’s for the market to resolve. After which if applicable, refer it to the regulators.
RITHOLTZ: So I might assume the NYSE has a reasonably shut relationship with the SEC and there’s in all probability a number of forwards and backwards frequently. Inform us a bit bit about that. How does the —
MARTIN: Properly, they’re a regulator. We’re an SRO. So we do have a really shut working relationship with them. We’re —
RITHOLTZ: So that you’re a self-regulating group.
MARTIN: Yeah.
RITHOLTZ: However you even have a, a relationship with the federal government regulator.
MARTIN: Completely. Completely.
RITHOLTZ: And I might think about that’s a reasonably productive relationship.
MARTIN: It’s. It’s. Clearly, we have now a really sturdy rule e book. Anytime we make a change from a market construction standpoint from an order kind standpoint, that must be totally permitted by the Fee. So we spend a number of time with the SEC going by way of varied rule adjustments. We need to introduce a brand new order kind. We need to introduce a brand new — a special charge. There’s quite a lot of explanation why we have to do for filings.
RITHOLTZ: So let’s use an instance. I’m all the time — once more, now I’m going to indicate my age. The circuit breakers from the ‘80s and ‘90s have been fairly modest and issues actually needed to go off the rails earlier than they kicked in. Circuit breakers have very a lot been introduced in control each on the broad market and particular person firms. Inform us in regards to the circuit breaker, is that coming from the NYSE? Is that coming from the SEC?
MARTIN: So that’s one thing within the wake of the volatility that has occurred at varied factors, varied cases of stress available in the market, regardless of the case could also be.
RITHOLTZ: I imply, this goes again to ‘87, proper?
MARTIN: Completely. Pandemic. The market has actually — the optimistic of each time there was a problem, the market has developed system safeguards, for lack of a greater description. So — and so they apply to the entire exchanges. So volatility halts, for instance, we have now volatility halts for securities, particular person securities. However then we even have system halts when the whole thing of the market has a sure drop. For instance, you noticed the market extensive circuit breakers kick in, I imagine, 4 instances in the course of the pandemic, actually in the course of the top of the pandemic and that’s —
RITHOLTZ: March 2020. Yeah.
MARTIN: Yeah. And the best way that works is that if the S&P is buying and selling 7% beneath its opening degree, it should mechanically halt.
RITHOLTZ: Opening degree or earlier shut, how do you categorize that?
MARTIN: Earlier shut. Earlier shut. Yeah.
RITHOLTZ: So we shut at 3000 and we open 210 factors beneath that, there’s a halt proper there?
MARTIN: Sure. Yeah.
RITHOLTZ: Is sensible. And particular person firms, what are these circuit breakers like?
MARTIN: It’s, I imagine, 5% up or down. Will probably be at 10 halt.
RITHOLTZ: In order that’s a ten. And the primary halt is —
MARTIN: And really, to be truthful, it relies on the liquidity within the inventory. It could possibly be 5%. It could possibly be wider, relying on the general liquidity in market cap of the inventory.
RITHOLTZ: However once we — once we see a liquid inventory take a 5%, or an 8%, or a ten% haircut, they have an inclination to maintain buying and selling.
MARTIN: You’ll have a really quick halt, after which it should —
RITHOLTZ: Simply to let the e book form of rejigger?
MARTIN: Appropriate.
RITHOLTZ: So the primary halt is what number of minutes? 5 minutes?
MARTIN: I feel it’s 10.
RITHOLTZ: 10 minutes?
MARTIN: Yeah.
RITHOLTZ: All proper. After which the second halt is longer.
MARTIN: Yeah. After which if this continues to be a multitude, it’s halted for the day. So the primary, second, third strike, they’re out. We haven’t seen that in fairly some time. What occurs the subsequent day once we reopen? How is that priced? Is it simply the messages and orders, or is there a specialist attempting to facilitate that?
MARTIN: There’s a specialist. That’s the place the open — that’s the place our market mannequin shines. You’ve the opening public sale and the closing public sale, which once more carried out that perform I discussed earlier of smoothing out any imbalances, regardless of the case could also be to make for a smoother open and/or a smoother shut. And that’s why once I talked about earlier that we’ve seen two instances much less volatility on the open and 3 times much less volatility on the shut this 12 months, that’s what I’m speaking about. It’s the opening and the closing auctions.
RITHOLTZ: As a result of an individual is basically —
MARTIN: As a result of an individual is attempting to make sense of what’s occurring.
RITHOLTZ: Proper. Smoothing that out and making it a bit extra balanced than it may need been.
MARTIN: Appropriate.
RITHOLTZ: And which means they’re additionally going in danger and taking positions to facilitate that.
MARTIN: That’s proper.
RITHOLTZ: So that you talked about a few issues I didn’t get to, I need to comply with up on. One is the twin itemizing. So when an organization is listed right here and abroad, or is that the one motive to be a twin itemizing? How typically — what are the opposite causes to be — moreover geographic, to be twin listed?
MARTIN: Lots of instances, it’s geographic. Very sometimes, there are some securities which can be twin listed on us and our closest competitor within the U.S., however that’s very rare. So it’s usually to get entry to a special group of traders. Lots of instances you’ll additionally see a major itemizing after which one thing referred to as an ADR being listed within the U.S. the place we’ll do the first. And that’s extra overseas issuers that need to have their major itemizing on the house market, however then faucet the liquidity within the U.S. market. In order that they’ll situation an ADR.
RITHOLTZ: After which what about additions and subtractions? I do know we often see firms that have been as soon as smaller firms listed at what was once thought of regional exchanges —
MARTIN: Yeah.
RITHOLTZ: — graduate to the NYSE. After which once in a while, any individual, you realize, is previous their promote/purchase date and so they get de-listed. Inform us a bit bit about what that course of is like.
MARTIN: Yeah. I imply, the de-listing course of, you realize, there’s a number of issues that go into the de-listing resolution.
RITHOLTZ: However it’s fairly mathematical, proper?
MARTIN: Yeah, it’s. It’s.
RITHOLTZ: You recognize, verify these bins or —
MARTIN: We’ve acquired — the reg has quite a lot of necessities to take care of your itemizing. It could possibly be sure monetary wherewithal. It could possibly be the quantity of shareholders, particular person shareholders which can be taking part in your inventory. So there’s a system that will get adopted.
RITHOLTZ: And what in regards to the reverse? What about any individual graduating, for lack of a greater phrase, to the NYSE?
MARTIN: Yeah. And we’ve seen really fairly a number of firms graduate to the NYSE this 12 months alone. We’ve really seen fairly a number of firms switch to the NYSE this 12 months. I feel we’ve had 14 thus far up to now —
RITHOLTZ: That’s rather a lot.
MARTIN: — which is our greatest 12 months on document. However we’ve seen — we have now a smaller listings venue referred to as NYSE American, which is for the smaller cap firms. And you realize, we’re actually blissful once we see them graduate to the large board, for lack of a greater description, as a result of it means they’re having success. They’re having an incredible quantity of success within the public markets.
RITHOLTZ: All proper. Let me throw you a bit little bit of a curve ball. I’m going to ask you a query you possibly can’t presumably reply, however I really feel compelled to ask it.
MARTIN: Superior.
RITHOLTZ: So I bear in mind getting a tour of the ground of the trade one million years in the past, and it was large room after room, after room down on Wall Avenue and Broad, and actually the place bodily chairs have been being traded, traded bodily individual to individual. That has slowly been computerized. That’s slowly been morphed into the fashionable market construction. However I’ve very fond reminiscences of that large constructing that takes up like two metropolis blocks. Is there all the time going to be a bodily trade? That is the query that I don’t know if anyone can reply. However is there all the time going to be a bodily trade on Wall Avenue? At what level does that simply, you realize, develop into a venue for aftermarket IPO events and issues like that?
MARTIN: There may be all the time going to be the New York Inventory Trade on the nook of Wall and Broad. We’ve been right here for 230 years, counting us being right here for the subsequent 230 years. We’ve survived many battle, pandemic, volatility, disaster —
RITHOLTZ: Explosions.
MARTIN: — all types of — all types of unlucky occasions. So there’ll all the time be an trade on the nook of Wall and Broad.
RITHOLTZ: That’s actually good to listen to. I’ve very fond reminiscences of that. And never too removed from there, the tour of the Federal Reserve gold.
MARTIN: Federal Reserve, the vaults. Yeah.
RITHOLTZ: Proper. So these have been — I feel — I’m attempting to recollect if that was a highschool trainer or a university trainer. It was methods in the past. All proper. So I do know I solely have you ever for a couple of minutes extra. Let me soar to all my favourite questions we ask all of our company, beginning with what did you do to maintain your self entertained in the course of the pandemic? What have been you watching or listening to?
(COMMERCIAL BREAK)
MARTIN: Properly, in the course of the pandemic, I had the distinctive privilege of homeschooling two kids along with doing my day job, which was targeted on protecting the fastened revenue markets transferring ahead. In order that was — that was a problem. However I’ve to say I look again on it with fond reminiscences, not simply because our fastened revenue enterprise supplied a number of transparency in a very opaque market, but in addition I acquired to spend a while — a number of time with my children.
RITHOLTZ: That seems like enjoyable. Let’s discuss your mentors who helped to form your profession.
MARTIN: I might say that I’ve had the chance to have mentors which were bosses all all through my profession. It actually began with my first venture govt who was serving to information me by way of IBM, who taught me a number of actually necessary classes that I nonetheless keep true to, one in every of which is you possibly can by no means overcommunicate. However all through my profession, I’ve been fortunate, lucky that my bosses have all the time given me stretch jobs, the place they provide me a chance to do a job that possibly I didn’t have the background for, or I didn’t assume I had the background for, however they thought I used to be the fitting individual for that job.
RITHOLTZ: Sounds attention-grabbing. What are a few of your favourite books? What are you studying proper now?
MARTIN: Books are a problem primarily as a result of I’ve a finite period of time in my day. Proper now, you realize, persevering with to learn a few attention-grabbing enterprise books like, you realize, I all the time return to the Michael Lewis books as a result of they’re only a good learn —
RITHOLTZ: Can’t beat them.
MARTIN: — on prime of something. They’re a singular mixture of storytelling and enterprise, so it sort of scratches each itches, for lack of a greater description.
RITHOLTZ: Positive. I simply reread Liar’s Poker —
MARTIN: Yeah.
RITHOLTZ: — on its thirtieth anniversary. It holds up surprisingly effectively.
MARTIN: Yeah.
RITHOLTZ: And you possibly can see the outlines of, oh, it’s not fairly a full Michael Lewis e book, however there are hints of the author he’s about to develop into.
MARTIN: Yeah.
RITHOLTZ: Actually fairly attention-grabbing.
MARTIN: I additionally like Moneyball. Moneyball is one in every of my favorites. I imply, like that’s —
RITHOLTZ: Exhausting to beat.
MARTIN: You’re in baseball season. I’m a baseball fan. So subsequently I’m going to, you realize, deal with.
RITHOLTZ: We may even see the Mets go fairly deep into the playoffs this 12 months.
MARTIN: That I’m not going to — I’m going to carry my breath. We’re getting into September and you realize what often occurs to our boys from flashing in September, proper?
RITHOLTZ: They appear to be a bit totally different staff this 12 months below one other market participant, Stevie Cohen.
MARTIN: You bought to imagine, proper?
RITHOLTZ: Pay attention, I grew up with, you realize, the Lenny Dykstra period of you’re on the road and it’s really easy to get to Shea Stadium.
MARTIN: Completely.
RITHOLTZ: We used to go to video games on a regular basis and incessantly to be disenchanted, however thus far —
MARTIN: Properly, I bear in mind my first video games have been ‘85 and ‘86.
RITHOLTZ: Oh, effectively, ’86 is —
MARTIN: So I imply — and that’s once I simply fell in love with them.
RITHOLTZ: Bucky Dent and the little dribbler by way of the legs. That was it.
MARTIN: Precisely. Like Invoice Buckner and his title will go down in infamy I assume in Boston. However, man, I felt good in New York, proper?
RITHOLTZ: Yeah.
MARTIN: So — and watching that staff was a number of enjoyable with Strawberry and —
RITHOLTZ: That’s proper.
MARTIN: — Ron Darling, who I feel is a superb broadcaster. By the best way, he’s was an incredible broadcaster.
RITHOLTZ: You recognize, they have been all the time an attention-grabbing staff, even when they didn’t deliver house as many championships because the Yankees did.
MARTIN: They have been. They have been. They have been. I bear in mind going to the Subway Sequence between them and the Yankees within the World Sequence in 2000, I feel that was. And —
RITHOLTZ: Is {that a} playoff or —
MARTIN: No. They have been within the World Sequence collectively.
RITHOLTZ: Actually? 2000 is sort of a blur to me.
MARTIN: There you go.
RITHOLTZ: That was like ’08, ’09, that 12 months was a bit little bit of a blur. Our final two questions, what kind of recommendation would you give to a latest school grad who was interested by a profession involving information providers, listed shares, any form of buying and selling or exchange-based work?
MARTIN: The recommendation that I might give is to, in some respects, anticipate the surprising. And what I imply by that’s your conventional levels aren’t essentially going to be what’s going to make you profitable. So be intellectually curious in regards to the issues, not simply concerned in finance. Be intellectually curious in regards to the know-how below that underpins the programs. And clearly, by no means be afraid to talk up if you’d like a chance, or tackle an extra venture that might not be in your each day, however possibly one thing that’s simply an space that pursuits you.
RITHOLTZ: Fascinating. And our closing query, what have you learnt in regards to the world of knowledge providers, exchanges, market buying and selling and public firms immediately you would like you knew 20 or so years in the past?
MARTIN: That may be a nice query.
RITHOLTZ: We reserve it for final for a motive.
MARTIN: I suppose I want I knew how necessary — I want I knew how necessary the function of the programmer was going to develop into in monetary markets. I understood then that, successfully, truthful worth was decided by quite a lot of mathematical — a bunch of math, for lack of a greater description. These mathematical fashions turned far more refined over time. However I don’t know that I totally appreciated that the man or woman who’s writing the code was going to be the one which was interacting with the programs 20 one thing years in the past, and the significance of environment friendly interplay.
RITHOLTZ: Fairly fascinating. We’ve been talking with Lynn Martin. She is president of the New York Inventory Trade. Thanks, Lynn, for being so beneficiant together with your time. In case you get pleasure from this dialog, ensure and take a look at all of our earlier 400 or so podcasts we’ve performed over the previous eight years. You could find these at iTunes or Spotify, or wherever you get your favourite podcast from.
We love your feedback, suggestions, and options. Write to us at mibpodcast@bloomberg.web. Join my every day studying checklist at ritholtz.com. Observe me on Twitter @ritholtz. I might be remiss if I didn’t thank the crack staff who helps put these conversations collectively every week. Bob Bragg is my audio engineer. Paris Wald is my producer. Atika Valbrun is our venture supervisor. Sean Russo is my head of Analysis.
I’m Barry Ritholtz. You’ve been listening to Masters in Enterprise on Bloomberg Radio.
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