Big Board is luring exciting, newer companies Many, like Microsoft, stay happy on Nasdaq

THE BALTIMORE SUN

NEW YORK -- Bay Networks Inc. was a perfect fit for the Nasdaq stock market.

The Santa Clara, Calif., computer company soared 10-fold on the Nasdaq, one of the hot-technology stocks that helped the exchange promote itself as the "stock market for the next 100 years."

Bay won't be there to find out, however. In January, it abandoned the best-performing U.S. stock market for its more sedate arch-rival, the New York Stock Exchange.

"Having the New York Stock Exchange listing is a stamp of

approval," said William Ruehle, Bay's chief financial officer. While shares of Nasdaq companies may outpace those on the Big Board, investors "feel more secure investing in NYSE stocks," he said.

Once a slumbering giant, the 204-year-old NYSE has been revitalized, attracting fast-growing, high-technology companies such as Bay Networks while offering investors its traditional safety and security.

"We're the world's greatest equity market," said Richard Grasso, who was appointed NYSE chairman last year. "We've invested in technology so we will never be in a position that our technology doesn't meet the needs of the market."

A record 82 corporations bolted to the Big Board from the Nasdaq in the past 16 months, some coming in the aftermath of a U.S. Justice Department investigation into whether Nasdaq market-makers conspired to fatten their own profit margins at the expense of investors.

The NYSE's resurgence also reflects the stock market boom. Seats on the exchange have traded at a record $1.25 million, up from $1.15 million on Sept. 21, 1987 -- shortly before the market's 508-point crash.

Companies from Indonesia and Ghana to Sweden, Germany and the United Kingdom are having their shares listed on the NYSE to take ad-vantage of investor demand for equities.

The NYSE's allure has confounded those who not long ago criticized the U.S. economy and the Big Board as uncompetitive.

A few years ago the Big Board was losing ground to regional exchanges and electronic markets.

Hot new companies were going to the Nasdaq, which was shedding its image as an incubator for companies that would graduate to the Big Board. Two of the biggest, Microsoft Corp. and Intel Corp., still have no intention of moving from Nasdaq.

One magazine likened the NYSE to a railroad in an age of superhighways and cheap air travel. Much of the criticism was unfair, Grasso says, but he concedes that the Big Board could be viewed as a for-members-only club in which the membership was aging. The decline would have continued "had the exchange continued to operate" as a club, Grasso said. "But this is a very different institution today."

To some extent, the NYSE's rebound may be traced to the way it responded to the 1987 stock market crash. The Big Board proposed new rules to the Securities and Exchange Commission to reduce volatility by curbing computer-guided trading

whenever the Dow industrials rise or fall 50 points, and by temporarily halting trading if the market tumbles.

Enacting these steps "gave everyone confidence in the exchange and the markets" said John Phelan, former NYSE chairman.

It also showed that the Big Board cared about small investors -- who'd complained bitterly they were at the end of the line in October 1987.

Grasso may be the Big Board's most visible marketer himself. In January he stood outside its landmark Wall Street headquarters in subzero weather to give Toronto's Rogers Communications Inc. a picture on the day of its listing.

The NYSE "welcomed us with open arms," said Chief Financial Officer Graham Savage. By contrast, the company's been listed on the Toronto Stock Exchange since 1927 "and we've never been invited over," he said.

To be sure, the NYSE has benefited from other circumstances, such as the Nasdaq's own problems. The Nasdaq is still being investigated by the Justice Department and SEC over whether it prices shares fairly for investors. Just as embarrassing for the Nasdaq have been various mechanical breakdowns, including the time a squirrel shut down trading by chewing through a power line in 1994.

Nasdaq officials say it's changing the way it does business and doing more to regulate itself. "We have been under the regulatory spotlight for the past two years, but it does not appear to have affected investor confidence in our market or in the companies using our marketplace to raise money," said spokesman Marc Beauchamp.

The NYSE faces challenges of its own, such as capturing more top Nasdaq companies and international listings. Many high-technology companies remain loyal to the Nasdaq.

"We're very happy where we are. We started here," said Connie Weaver, Microsoft investor relations chief.

The Nasdaq, a collection of 531 market-makers linked by computer and telephone wires, "is an electronic exchange and we really believe that is the future," said Gordon Casey, Intel's head of investor relations.

The Big Board is accustomed to those doubting its viability. "Every year for the past 30 years we've heard 'Last year was a good year, but you guys are finished,' " Grasso said. "In 10 years, I'm sure you'll be saying, 'Sure you got the companies of the 1990s, but what about the companies of 2006?' "

Pub Date: 5/19/96

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