There is a story, that may be apocryphal, of a black shoeshiner remarking upon the IPO of the Coca-Cola Co. (NYSE:KO) in 1919, "They done moved that Wall Street down to Atlanta."
Well, now they have. Once the merger of New York Stock Exchange/Euronext (NYSE:NYX) into Interncontinental Exchange (NYSE:ICE) is complete, around the middle of next year, the fabled exchange floor will indeed be owned by a company based in Atlanta, specifically an office building on the far northwest side overlooking the Chattahoochee River. (Although it would be more correct to call it Sandy Springs, as the suburban area where the building is located was incorporated separately a few years ago.)
Most analysis of the deal emphasizes ICE's work with derivatives, where it has an operating margin that brings almost two dollars in three down to the bottom line. Under Jeffrey Sprecher, the company has indeed become a leading market-maker in derivatives, but the key to the company, and the deal, lies in its computerized trading operations, which are far superior to the NYSE's own.
The company tried to acquire NYX early this year, bidding $11.3 billion along with NASDAQ, a bid that eventually scuttled a deal with the Deutsche Boerse. Sprecher was later moved to publicly apologize to NYX CEO Duncan Neiderauer for hard feelings in the wake of the fight. Under the deal as negotiated NYX gets 36% of the combined company's equity and Neiderauer is named President, under Sprecher as CEO.
What happened in the wake of Hurricane Sandy says a lot. ICE kept going, while the NYSE fell apart, closing for trading over some days. Neiderauer, while praised to the skies by CNBC and others, in fact was not a great operations guy. After the damage was cleared, the need for a deal became clearer.
The ICE system has a browser-based front-end, and it's highly scalable, supporting Java as well as Windows technologies. While the actual computers used in trading are located in Chicago, its communications system is dubbed Yellow Jacket, after the Georgia Tech mascot.
So while traders may talk about derivatives and Atlanta, the key to this story lies in computer operations. Stock trading is moving out of any physical location, and into the cloud.