Six NYSE companies will also trade on Nasdaq
Published: Tuesday, January 13, 2004 at 6:01 a.m.
Last Modified: Monday, January 12, 2004 at 9:50 p.m.
NEW YORK - Six companies currently listed on the New York Stock Exchange, including heavyweights Hewlett-Packard Co. and Charles Schwab Corp., have decided to dual-list their stocks on the Nasdaq stock market, increasing the competition between the two equity markets.
Taking advantage of the dual-listing program, first reported last week and unveiled by Nasdaq officials Monday, computer maker Hewlett-Packard and financial giant Schwab were joined by petroleum firm Apache Corp., electronic design company Cadence Design Systems, financial services company Countrywide Financial and drugstore retailer Walgreen Co.
The move gives investors the opportunity to find the best price on the two different markets, and gives the dual-listed firms a chance to increase their liquidity, or have more trades executed, because of Nasdaq's faster systems, said Steve Thel, professor of securities law at Fordham Law School.
"However, there's also a downside, in that if you don't have a critical mass of volume on one exchange, dual-listing with another could dilute your liquidity and make your stock difficult to move in either market," Thel said. "That said, I think a number of companies will look very closely at this option. If the liquidity adds up, you'll see more companies do this."
Nasdaq's dual-listing option is the latest round in the battle between the all-electronic market and the elder NYSE, which has been criticized for both its governance and its older trading systems. Nasdaq chief executive officer Robert Greifeld said dual-listing can be a tool to entice companies to abandon the NYSE entirely.
"The recent issues with the New York Stock Exchange certainly are important, but that hasn't been central to our discussions with these companies," Greifeld said. "Our discussions with them have been based on the performance of the market and on speed of execution, depth of liquidity, and price discovery."
Dismissing the threat of Nasdaq competition for its business, NYSE spokesman Bob Zito said the exchange is always planning for the future and constantly improving its market systems.
He noted that while 80 percent of NYSE stocks trade on the exchange itself, 20 percent are already traded on other markets as well, including Nasdaq.
Nonetheless, Nasdaq's move may push the NYSE to jump-start its plans to upgrade its floor trading systems, according to Espen Eckbo, director of the Center for Corporate Governance at Dartmouth College's Tuck School of Business.
"In the long run, this is good for the NYSE, because it will push them into implementing some kind of long-term strategy," Eckbo said. "In the short term, of course, this is cause for concern because their plans are not as far along as they should be."
The dual listing creates a possible problem for mutual fund firms, which use the 4 p.m. Eastern time closing price of stocks in computing the net asset values of their shares. They would have to choose between the NYSE and Nasdaq prices.
While no formal consensus has been reached within the fund industry on how to value dual-listed stocks, Vanguard Group spokesman John Demming said his company would use the closing value of a dual-listed stock on the exchange where the bulk of trading took place on a given day.
In stock tables distributed by The Associated Press, the companies will continue to be listed under an NYSE heading.
Schwab chief executive officer David Pottruck praised the dual-listing option. "Our hope is that as more companies opt for dual-listing, we will experience a healthy increased competition in our trading markets, resulting in innovative applications of technology, heightened transparency, and improved trading outcomes for all investors," he said.
Walgreen chairman Dave Bernauer said his company feels dual listing will bring more competition to the markets and give investors more choice in trading venues.
"We believe this move is in the best interests of both our individual and institutional shareholders," he said.
Walgreen, based in Deerfield, Ill., said it had signed a one-year agreement with Nasdaq to list on both exchanges, and that the dual listing will become effective within several weeks.
The firms will trade on Nasdaq with the same three-letter ticker symbol used on the NYSE, Nasdaq officials said.
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