The New York Stock Exchange and Euronext are in talks for an $8bn exchange merger [AFP]
Last September, I was back on Wall Street for what might have been the final hurrah of the Occupy Movement as a force that confronted the power of high finance in the name of the 99 percent.
Thanks to a police over-reaction, many of the employees at the New York Stock Exchange couldn't get to work in time because the financial district was occupied by armies in blue sent there to defend it from its righteous critics.
The Stock Exchange lived to trade another day, but just a few months later, the symbol of capitalism that it represents may be ready to shuffle off our mortal coil. Talks are in the works for the Exchange which saw so many booms and busts over the years, to be merged with, heaven forbid, Europeans or at least a company called "Euronext."
Wall Street is the land of dreams and deals. But this one involves $8.2 billion from an outfit called the Intercontinental Exchange, or ICE (no, not the ICE immigration police that deport illegal aliens). How in this time of austerity and structural unemployment did these wheeler dealers come up with an $8.2bn bill is not even a question being asked.
The New York Times was incredulous: "It sounds preposterous. A businessman from Atlanta blows into New York and walks off with the colonnaded high temple of American capitalism...his $8.2bn transaction...will close later this year. And with that, 221 years of Wall Street history will come to an end."
What seems to be happening is that stocks are now out, and derivatives are in. In a side deal, The Knight Capital Group (Knights like in the middle ages?) will be sold for another $1.4 billion to Getco, a company that we know little about because it is privately held.
Getco has been deep in the mysteries of high performance trading in which super speedy computers replace people buying or selling on microscopic price variations. Since this story broke, there have been many reported scandals about the unreliability of high-performance stock trading.
Lawrence Baxter, a professor at Duke University, writes that this technology is unstable:
What we face here is not only the eclipse of stocks and equities but their replacement with even more risky and speculative programmed trading that moves so fast it can't likely be regulated effectively, although the wheeler dealers behind this "innovation" say that the Dodd Frank "reforms" will help them.
What we have here, according to the editorial wags at the New York Times, is the creation of the "world's largest derivative market operators" and the "most dominant stock traders, who would take advantage of securities regulations that have encouraged the development of alternative trading systems."
Say goodbye to the idea of effective financial regulation through the Dodd Frank mechanisms or any other.
The fact that this was happening in the week that the government finally decided to prosecute some bankers for their LIBOR transgressions shows how the guys on top remain on top by thinking and planning ahead.
Government regulators are no match for their cleverness and their shrewd capacity for accumulation and extraction, as big money making there is described.
Americans for Financial Reform, a public interest group trying to keep up with all this, seems to be fighting the last war given these new developments.
They just issued a statement [PDF] condemning the Libor scandal that the next one is likely to dwarf, writing:
And yet we still have media talk of the need for self-regulation, not tough enforceable rules even as the "quants" -- PhDs in mathematics -- take over from the wheeler-dealer banksters in determining the future of finance.
The New York Times has now enumerated the many ways this deal threatens taxpayers and investors, noting that "regulators have made little progress in developing rules to monitor and control high-speed trading."
Their conclusion is that "the mergers should remain on the drawing board unless and until regulators can reassure the public that the newly created companies will operate not only for private gain, but in the public interest as well."
Fat chance. That's like the little Dutch boy with his finger in the dyke. Technological innovation has a way of sweeping its detractors away.
Big money talks as does the promise of "modernization," which is exactly what the reformers during the Clinton Administration pledged when they deregulated all the rules and led us into the financial collapse from which the world has yet to recover.
Perhaps, by the second anniversary of Occupy Wall Street, activists will finally get into the NYSE building and find nothing there but some wires and satellite dishes linked to offsite computers in some off-shore location. This is exactly what is inside the NASDAQ building in Times Square, which to the public looks like the headquarters of an exchange, when, it fact the computer-run company is run by technology, not people.
Capitalism is marching on, and leaving its familiar trail of goodies for the few and deprivation for the many.
They are already calculating the hundreds of millions in "break up fees" that will have to be paid if the mergers fall apart. But to put a smile on our faces, the Dealbook section of the Times reports:
These names are probably the only part of the deal the public will relate to, although if you follow the money, it appears that the South is rising again!
That's about all that ordinary people will comprehend about the complexities of this mother of all deals that moves the money world into the next world.