NYSE Euronext (NYX)
April 26, 2012 8:00 am ET
Jan-Michiel Hessels - Former Member of Supervisory Board, Chairman of Nomination, Remuneration & Corporate Governance Committee and Member of Information Technology Committee
Duncan L. Niederauer - Chief Executive Officer and Director
Janet L. McGinness - Senior Vice President and Corporate Secretary
Michael Geltzeiler - Chief Financial Officer and Group Executive Vice President
Lawrence Leibowitz - Chief Operating Officer
Good morning. It is 2 minutes past 8. Welcome, warm welcome to the 2012 New York Stock Exchange Euronext Annual Meeting. I'm Jan-Michiel Hessels, Chairman of the Board of Directors. I'm happy with be here with you again. I would also like to welcome those stockholders who are attending the meeting via the Internet this year. Seated to my right, Duncan Niederauer, our CEO; to my left, you have Marsh Carter, Deputy Chair of the Board of Directors; and finally, at the end of the table, Dominique Cerutti, our President and Deputy Chief Executive Officer. I now call the 2012 annual meeting of stockholders to order.
Before we begin the formal business of the meeting, we will first hear the CEO's report on the state of the company. Afterwards, we'll conduct formal business of the meeting, and finally, we'll take your questions and answers. Your questions, in fact, I'll try to answer them. To ensure the stockholders have ample opportunity to ask questions, we ask that only stockholders or the designated proxies ask questions. If you're called on by me, please begin by identifying yourself and the number of shares you hold. Each stockholder who has complied to the applicable procedural requirements will be allotted 2 minutes to present his or her stockholder proposal during the formal part of the meeting and 2 minutes to ask questions during the Q&A session at the end of the meeting. As a reminder, questions, of course, should relate directly to the company business and not personal or individual matters. Copies of the agenda and the rules of conduct have been placed on your seats. So as promised, our CEO, Duncan Niederauer will now give his CEO report. I ask that all stockholders hold their questions until the appropriate time at the end of the meeting. Duncan, please.
Duncan L. Niederauer
Thanks, Jan-Michiel. Good morning, everybody. A little smaller crowd than last year. As I said to a few of you, I think a lot of people are probably watching on the Internet this year, and normally, a lot of people who come are the more institutional shareholders and some of our analysts. As you probably all are aware, we did an analyst day just a few weeks ago and many of them were here for that. So I think we expected it to be a little thinner today. But thanks for those of you who came. It's nice to see folks that I really only get to see once a year. So welcome to all of you.
As I was thinking about this morning, I couldn't help but reflect on the events of the last year and specifically what -- when we were sitting in this room about a year ago, what was going on at that time. Obviously, we were in the middle of a situation where we'd been approached by 2 of our competitors. That approach proved to be un-actionable and fairly short order. And then, we spent really the better part of the last year trying to execute around what I continue to believe would've been a very transformational merger. I think you know the outcome of all of that. But I think I would be remiss if I didn't say it to all of you, not only the support we got from all of you as we tried to do something that I thought was a truly transformational opportunity meant a lot to us, but it's also not lost on us how patient everybody was. That was obviously a long process that ultimately ended with an unfortunate outcome, and I think that the challenge we have going forward is to first reflect on all of that. But at the same time, not spend too much reflecting on that because we have a business to run.
Now if you ask those of us on the team, it feels like forever ago that we were ultimately told no by the European Commission. It was not even 90 days ago, and it feels like it was quite a long time. So what we've bring been trying to do since is think about reinforcing our strategy, testing the hypothesis, making sure that the strategy we've been deploying for the last few years still makes sense. So what I wanted to talk about this morning, before I turn it back to Mr. Hessels, is just what we've been thinking about, how we've been thinking about it and then give you a little insight to where we think we go from here as a company.
I think this is a required -- I'll give everyone 1 minute to read that from -- okay, I think you're done. So a little bit on the strategic overview to start with. The way we think about our strategy, our mission really hasn't changed. A lot of people, including our own employees here, came to us after the prohibition notice and said, so now what's the strategy? I said well guys, we had a strategy. We like the strategy. We executed against it very well in 2011 as evidenced by the results in terms of the earnings growth and everything else. I said, so we're not going to have a new strategy. It's an appropriate time to retest the foundation of that strategy, but we've been executing against that strategy. We thought the merger was a chance to accelerate it. So rather than come up with a brand new strategy, let's go back and retest the community strategy and make sure we still believe that we're in a position to do that.
Now I'm sure most of you in the room who pay attention to the markets would agree that the trends that are obvious to a lot of us that are going on, whether it's assets being -- becoming increasingly correlated in a way that, in my 25 years in the business, I've certainly never seen. That's leading to more asset class convergence, which means more demand from our customers to say, as the asset classes converge, I expect to hear from an exchange like the -- like NYSE Euronext that has a diverse portfolio, help me figure out how to take advantage of that convergence. Oh, and by the way, at the same time, I, as a customer, have a lot less capital to play with because the regulators, particularly the banking regulators, are telling me we're going to give you much higher capital charges now. So we think, if anything, our portfolio should position us to be in a unique position to deliver some of those services to clients given those trends, which I think are here to stay for a while. And that's our challenge and our opportunity and that's what we're going to talk about this morning.
And the way we think about it is something we're calling Project 14 here internally, because I want the team focused on 2014, not the next week, not the next month, not the next quarter. I think particularly important in the macro environment we're working in now, but it's still about the same 3 pillars that I think really our strategy has been underpinned by for a while. It's finding opportunities for growth, either with bolt-on acquisitions or with organic growth. And we'll talk about some of the initiatives that we've launched internally. It's about continuing to wring out as much efficiency as we can. I think the team and I would be the first to admit that a lot of efficiencies that would've been delivered in the form of synergies had we done the deal, those probably did not get done last year because we had the long list of things we were getting ready to do if the deal got done. You'll hear for me in a few minutes about what we're trying to do on the efficiency front. And then, as we've always been committed to, it's about strategic capital deployment. And there, I mean, more with a shareholder focus. That's about dividend policy, that's about using the free cash flow we generate to think about buybacks and the like. And we'll talk a lot about that this morning as well.
So the first thing we did was we went back and we said, "Let's look at the assumptions that are underlying the strategy. Does it still make sense?" Let's not believe our own BS. Let's make sure we get out there and say, "Is this still true?" Because if it's not true, we have to amend the strategy.
So what are the clients telling us? They need more than ever, access to markets around the world and it needs to be efficient. They don't want to have connections all around the world, they want to connect us in one place that's most convenient for them and count on us to get them in all the geographies and all the asset classes that they want to be involved in. I continue to believe it may sound like it's not a big role. The community we have the privilege of overseeing here because of who we are and our primary business, which is in the capital formation business, that gives us an opportunity to convene investors, decision makers, policymakers. And if you want to say more broadly, the umbrella of capital in a way that almost no one else can. I think we've retested that. We believe that continues to be true. We're not afraid to partner with our key clients in places where we think it makes sense. For those of you who've studied the exchange space for a long time, and I know a lot of you in the room have been involved here, you were either members many years ago and you've watched the evolution of the capital markets, if you think about it, like, what really happened? Mutualized organizations went completely de-mutualized. And I think in some of our businesses, which we'll talk about today, will remind you that really where we're landing is not terribly innovative or terribly new, it's just kind of in the middle of those 2 ends of the continuum. And we'll talk about some of the businesses where we're doing that.
We continue to believe that because of the businesses that we operate and the products that we traffic in, like that -- if we figure out how to leverage that better than we have to date, like that set of customers and products is particularly attractive in places like Warsaw, for example, we'll call that an emerging market. The fact that we could bring to bear technology, a global client base and different products made us a much more attractive partner for them than the people who were competing for their business who were really either only in the equity derivative -- the equity business, the derivatives business or the technology business. So our challenge and our opportunity, again, is we have these -- this diverse portfolio, how do we make it sing under one umbrella.
Now to make sure we're not just saying those words are great and that it sounds really good, and it sounds like a nice strategy, you have to then look at each of your businesses and say, is there evidence that we can point to that, beyond a shadow of a doubt, says we're on the right track. You think about the Amex deal. When we first did the Amex deal, people were scratching their heads, saying, "Why would you possibly pay anything for an asset that's losing all that money?" Our view was simple. That was a pretty valuable franchise. It just had to get under a different umbrella because it couldn't scale by itself. So we've taken Amex options market share from 5% to over 15% in the time that we bought it. People had written off that options exchange as basically being dead. Combined with Arca, we're now the #1 U.S. options player. And Amex options is a good example of where we're partnered with our clients as well. If you think about what we said about NYSE Technologies a few years ago when it was a $250 million to $300 million a year business, and we said we thought we could get through some acquisitions and some organic growth and some expansion globally to $1 billion top line by the end of 2015, people kind of shrugged their shoulders and said, "I doubt you're going to be able to that. That's interesting, but it sounds good in terms of repositioning the company. What does it really mean?" Nearly $500 million last year. And I think we can expect that to grow double digits again this year in spite of the environment.
The listings business, look, I'll be very blunt with you. We were disappointed to lose Facebook. It's nice and it's comforting to say to ourselves, 3 or 4 years ago, we wouldn't have been in the frame. They wouldn't have even thought about us. They would've treated us the way they treat -- big companies like that treated us, when I first got here, where they would look at me and say, "Why would I talk to you about listing my company there? Like, you guys are 200 years old. You're not an innovative place." Since then, we've made a lot of progress, right? Almost 50% of the tech deals last year, more than 50% of the tech deals this year, would I have liked to have won that one? Absolutely. I think we made it a very tough decision for them, but we're still doing very well in spite of that. Yes, that's a profile IPO, it's one IPO. We continue to lead the way in the IPO space, not just in the U.S., but globally. And that's also evidenced by the success we've had in transfers. Just in the last 4 to 6 weeks, we've had TD Ameritrade and Teva Pharmaceuticals both come here from NASDAQ, both NASDAQ top 25 or 50 companies. So the -- our listings business is alive and well.
If you look at the derivatives space, NYSE Liffe U.S., some good news, some -- a lot more work to do. In terms of open interest, a really important metric, 10% open interest in Eurodollar, that's a zero-sum game with the CME. At the same time, the daily volume is not what we'd like it to be. Now part of that, it's easy to just say that's the macro environment. Eurodollars, we're trading $3 million contracts a day. When we started, it's more like half of that now because the low volume and low volatility that we're seeing in the equity markets is also very true, particularly in the short end of the interest rate curve right now. I still think this is a bet worth making, and we're not standing still saying, "Well, I hope the volume comes back." We've got an innovative clearinghouse solution with NYPC. We just announced a deal with LCH that we'll talk about in a minute that will bring their SwapClear business into the U.S. where we can hopefully get back to that point I made a minute ago where, if you can start to margin for your clients, swaps against cash bonds, against futures, that's a real opportunity that's never been presented to them before. So we've got some things going on there. And obviously, we have evidence that we've been able to take cost out of this business. We know we inherited a business that was bigger and more bloated than it needed to be. And we've been trying to figure out how to run it more efficiently while still providing world-class client service as well.
So if you then take that step back and say, "Let's step away from the business. Is that translating to results?" You can see on this page, we've had net revenue growth in the last couple of years. If you look at the 2-year view, costs are down, operating margins are up, tax rates are down, leverage is down, and we've also taken a lot of the free cash flow and returned that to our shareholders. Dividend is about $300 million and change a year. We're in the middle of what was $1 billion buyback that we started a few years ago. We had $550 million left coming into early this year, and you know that that's underway. We announced that in February. The data centers are built, CapEx is now down to much more of a maintenance level. So I think you can count on that to stay below $200 million for the foreseeable future. And although we often forget, because the last year has been a pretty bumpy ride, total shareholder return since the bottom in March of '09 is more than 100%.
Now lest you think we're giving ourselves credit, we understand the S&P is also up about 100% since the March '09 lows, so we've performed in line. It's -- we haven't outperformed, and we're not taking credit for it. So here it is. Since the end of 2009, here's what it looks like. So our industry is struggling, but you can see we're kind of in the middle of the pack. We've slightly underperformed the S&P. If you look at '10 and '11 and '12, so call it the last 30 months, we've outperformed a couple of our competitors. We've underperformed a couple of our competitors. So these are just the facts. We're not pleased. We think we could do a lot better, and what the rest of the presentation is about is to think how we can do better. But that's how the industry stacks up over the last 30-month period.
Now let's shift to really the meat of the presentation. We keep talking about this community. What do we mean by the community? The community is this assemblage of businesses and clients that we have. Some of the assets that we have are the clients. Some of it is about the technology. Some of it is about the business franchise that we run. And what we get asked a lot is, do these businesses really have anything to do with each other? It's interesting that they all landed under the same umbrella. Is that an accident of history or is there actually something you can do to make this choir sing in a way that it has not to date? And what this chart really tries to show is there are a lot of natural overlaps that should enable us to do that. So if you think about it, I'm not going to hit every point on this slide. Through the NYFIX acquisition a couple of years ago, we now have connections to 1,500 buy-side customers. Now most of you in this room who grew up in the business would know that we're not allowed today to have a direct relationship with those buy-side customers in terms of a transacting relationship. But we can have a technology relationship, and it does give us opportunities to sell them other technology services because that's perfectly within our purview and theirs.
If you think about our technologies business, this is not just a fancy way of trying to push the company into some new businesses. I think that's important. I've said from the time I got this job, I thought it was more important for us to think like an applied technology company, not just a markets company. But if you look at the lower left-hand side of the screen here, the business that we're driving in our technology solutions business, 95% of the trading that happens on NYSE Liffe in the U.S. and abroad is conducted by clients of our technology business. This is not like it's a whole new set of customers. What we're trying to do is get more mind share and more wallet share from the customers that are already naturally in our businesses every day. But I think in the long run, we cannot rely on just being a markets business. So let's step into how we're going to think about those 3 pillars, growth, efficiency and capital deployment.
Before I get into some of the things we're doing on the growth side, let's just take a minute to be a little realistic about the macro environment in which we're operating which I think, for lack of a better term, let's call it the new normal. What none of us in this room knows, myself included, is whether this is a new normal that's going to last a few more weeks, a few more months or a few more years. And anybody in the room who will tell you, "Oh, I have a crystal ball into what volumes are going to look like in the underlying markets." If anybody does, please see me after the meeting, okay. I don't have a crystal ball for later this year, much less 2 or 3 years from now in terms of what volumes are going to be. But what's going on in the macro environment around us right now? I mentioned it earlier. Everyone's got less capital to play with. So they're being more selective about how they trade, and we even see that in places where it's not necessarily about the capital. The buy side is absolutely turning their portfolios over less than they were a few years ago. I can remember being a young trader and sales trader, covering a lot of the big institutional clients early in my career. People traded around their core positions much more than they seem to today. And when I talk to them, I can't really explain how the -- they can't really explain to me why they're doing that other than they weren't concluding that, that activity was fruitful. They didn't feel it was adding enough to their returns, and I think they're also seeing the market demographics change a lot, which makes them a little more likely to just sit with their positions and trade around them less. At the same time, the buy side's going to have a lot to say in this new capital environment where more and more products are cleared centrally, where they -- it gives the buy side more of an opportunity to be a liquidity supplier in a way that they're really not today, right? If you think about a lot of the more opaque markets in the business, the buy side will express something they want to do, and they're a price taker, not a price maker. And I think in the new world, you're going to see the buy side -- you saw BlackRock announced its own bond platform the other day. I actually think that's a sign of things to come with the larger buy-side firms where, frankly, there's been as much consolidation as there has been on the sell side are going to start saying to themselves, "Why are we a price taker? We should be more of a liquidity provider and have more of a role here." In those other products, that might be good for us as we establish that aforementioned relationship with the buy side.
The clearing space, lest you think there's going be one CCP in every region or 1 or 2 around the world, it is going to be very, very competitive, and you're going hear us is talking about things that folks at the NYSE probably didn't talk about historically. We're going to be talking about collateral management. We're going to talk about margin offsets against products that we never envisioned trading in. That's clearly where the future's going to be because our clients are going to demand it. They want help managing their risk. They want help managing their collateral, all because capital is so constrained.
Competition's not going away, and it's frustrating because sometimes it feels like a very unlevel playing field, right? We're not the only industry where regulators have unleashed competition, made it easy for people to compete with the incumbents and then what they often forget is if those incumbents have some success, which they enabled through deregulation, it's nice to go back later and try to level those playing fields. In our business, at least, they've yet to do that. And one of our challenges that Larry and I and others here are working on is to remind the SEC, "Hey, we're happy to work with you. We're happy to compete. We're not trying to shut anybody down. It would be nice if you'd let us compete on the same ground that the people who are attacking us get to. The things they get to do we don't always get to do because, not of who we are, I think it's more because of who we used to be, right?" And it's hard for a regulator sometimes to think that forward.
And lastly, I think if there's a good trend on this page for our near-term business, it's that all the constraints we just talked about mean our clients want more technology. They're willing to outsource their infrastructure in a way that, frankly, 5, 6, 7 years ago, they would not have been willing to entertain that conversation. They thought it was too core to their value proposition, to their clients. Now they're realizing it's complicated, it's expensive, it has to be global. One of the byproducts of all this competition is there's so many places a sell-side firm needs to be connected to now around the world to service their clients. It is unbelievably complicated to manage that. We've got all that infrastructure. We've got the network, and we're having some success getting those clients to say, "Yes, I am willing to ship a part of my infrastructure out to you."
So now let's go back to where that leaves us and where can we then exploit opportunities for growth. This compass, we didn't really need to show this to all of you, right? If you recognize this, we showed it to you last year and it was -- and our point in showing this was this is what our portfolio looked like before the deal. And then if you remember, the next slide showed this same compass, and with the deal, the compass was all dark blue, right? Because it -- the DB merger filled in, the settlement and custody and post-trade piece of it. They had a bigger analytics business than we do and they had a bigger index business that we do. So -- and it also solved our clearing problem, not just our -- not just the hoped-for foray into settlement, custody, collateral and risk management. So this is a realistic assessment of where we are today. Now as I said to the group, our team, as soon as the prohibition came out, yes, we're standing alone, that doesn't mean we're standing still. So what are the things that we can do to try to fill in that compass, right? The completion of the building out of the derivatives clearing house well on its way, all the milestones being hit. Remember, we insourced most of that clearing a couple of years ago. The only piece we didn't insource was the treasury and risk management piece. We will give notice to LCH in the next few weeks. That'll be done by a little later than this time next year, and then that will be a fully integrated clearinghouse on that side of the Atlantic.
Closer to home, we have the JV with DTC in what we call NYPC, New York Portfolio Clearing. They clear the cash bonds. They clear the futures that we're trading at NYSE Liffe U.S. And the deal that I mentioned a few minutes ago, SwapClears, which is LCH's swap platform, their U.S. presence will be a partner with NYPC. So we will now have the first clearinghouse in the world, not just in the U.S., where you will have swaps, cash bonds and interest rate futures trading in the same clearinghouse. We think that's a big opportunity. It may not feel like one in this low-volume environment. But if we're right about all these other trends and the new normal, that should be very attractive to clients.
In terms of our issuers, we're very close to them. That's really where our brand has the most value is with the corporate community. I think it is incumbent on us, however, to make sure we never get in a situation where those clients think we're just a listing venue. We are trying to be their partner. We are trying to find them -- help them find ways to grow their business. And frankly, that's why we're winning a lot of these emerging growth company IPOs because we are finding ways to work with them. And we're telling them you can use our global brand. We've got the community. A lot of things you want to accomplish in your business, we're the ones that can help you. Don't think of us as just a place where you list your stock.
The right-hand side of it is more about some internal innovation around new products like contracts for differences in the U.K., and most of the right-hand side of the screen is about continuing to build out that infrastructure so that we are a more and more credible enterprise that the big clients can outsource their technology to. That's -- we have the data center in Mahwah. We have the data center in Basildon. We're not going to build any more data centers, but we are going to find the right locations around the world and make sure we have our hardware in those data centers like in Tokyo where we can use that as an Asian hub to be more valuable to our clients. So there are a lot of things to do on here. There are a lot of things that are going on. That's where we're going to try to get the growth from.
Now let's talk a little bit about efficiency. This is more within our control. The growth -- the opportunities to grow, the industry doesn't have a great history of organic growth. We are going to invest the time and effort in the things I just talked about. We can drive the top line with the clearing business. We can drive the top line with the NYSE Technologies business. Some of those other initiatives like NYSE Liffe U.S., like the CFD platform, those are more organic in nature. The industry does not have a great history of really driving the top line with those, and we have to be cognizant of that. Where we do have an opportunity to drive the bottom line, however, that is more within our control is driving the expenses and driving the efficiency. So if you were listening to our investor day a few weeks ago, we announced a -- as part of Project 14, a $250 million efficiency exercise that we will be engaging in this year, next year and in 2014. Some of that'll be about technology, some of that'll be about organizational efficiency, some of that'll be about optimizing the portfolio. You can't fall in love with underperforming assets in the portfolio. You have to make tough decisions even though those are not pleasant decisions.
So Larry and Mike are going to lead that effort, and here's a little more detail on what we're going to do. Like everything else we do here, you're going to get regular reports. No one's going to have to wonder how this is going. On every earnings call, we will give people a posting saying, "Here's how far we've gotten. Here's the milestones we're trying to hit." We don't hide on any of this stuff. So we think by the end of the year, we can get 25% of the $250 million out. By the end of next year, about $150 million of the $250 million out and then the rest will come out in 2014.
What is it going to look like? The technology piece of this, we're finally in a position with all the work we've done in the last 3 years building out the common platform to now drive to a world-class operating model that Dominique and our new Chief Information Officer, Peter Leukert, are going to drive to. We've now -- the work is done. The data centers are built. Virtually, all of our products are on UTP. Now it's time to officially retire all the things we don't need, get to the point where you really have the skill business that you've been so desirous of because we can now put everything on the same platform. And now it's about just driving the efficiency out where we get a lot of the legacy systems, a lot of legacy data centers, everything else can get retired now. And you will really have a world-class operating model where we have a much better prioritization decision process. You can finally run the company that had a lot of disparate technology assets and now you can run it the way you'd like to.
Organizational efficiency, that's just simply thinking about how we're our organized. I'd be the first to admit that when we set up these 3 businesses, the global derivatives business, the global equities business, the global technology business, I did that purposefully because I thought we were getting undervalued. People still thought we were just an equities exchange. So we set out, and we said there's a better way to report to the external world. Give them 3 businesses where it's obvious what the comparables are so it's easier for them to value each of our businesses. I have a fear that while that worked, internally, that translated in people's minds no matter what I meant to say that we got a little more siloed internally than I would like us to be. So part of operating more efficiently is to say, are there different products and different client segments to think about? Is that the right matrix for operating the business internally? No plans to change how we report to the outside world. I think that works. So there's a lot to do there, and the last piece of it is about business optimization. And we'll talk a little bit about that when we get into the capital deployment discussion as well.
All right. So last, but not least, on capital. I think this is a really important slide. So at the risk of taking too much time, I'm going to spend a lot of time on this slide. We believe we've evidenced to all of you that we are responsible stewards of the capital. This is a great free cash flow generating business. And I hope we've proven over the time we've all been here that we are very, very disciplined in how we think about this. So I left the last slide talking about portfolio rationalization, right? We sold our investment in the National Stock Exchange of India a couple years ago. We unwound an underperforming asset in Europe called SecFinex. We just unwound NYSE Blue. There are things you can look at in the portfolio where we say we've made investments. They're either are not standing up to hypothesis under which those investments were made, or the business idea that we had to do a new initiative no longer holds water. So you should expect to see us continue to be very disciplined about where we think we need to invest your money and what we're going to do about it. And there's no pride of authorship, right? If we see an investment that we made, we retest the hypothesis. You're not paying us to be a venture capital investor. You're paying us to run the business and manage your money, right? So that's number one.
Number two, you talk about the dividend and the buyback policy, right? It's a steady $300 million dividend a year, a little more than that. We're on the back half of a $1-billion buyback that we embarked on a while ago. We have returned more capital than anyone else in our industry. Now I got a lot of questions coming into the meeting because people could send in stuff online saying, "What about a special dividend? Other companies in your industry have been raising the dividend, how come you're not doing that too?" So I just want to be very clear on what the facts are, okay? The companies in our industry that have raised dividends recently, that has brought them up to either the level that we're already at or below the level that we're already at in terms of yield. So I think it's great that they're doing that. I think we set a good example a while ago. It took some of them a while to follow. That's okay. Now -- but everyone who's been raising the dividend, they're -- even the CME got a lot of attention. Their dividend yield is roughly half of our dividend yield, even with -- even after the increase. We are also in the middle of this large buyback. It's the biggest ongoing buyback in the industry right now. So I think in terms of returning excess capital to the shareholders, I think we're where, I believe, we should be right now. We're going to stay focused on targeted acquisitions. I think we've had good success, bolting things like Amex, NYFIX, Metabit and most recently, Fixnetix. We're getting very, very good at integrating those businesses. And then as we already talked about, we also have some organic growth opportunities. We don't over invest in those. They need to be nurtured but we do constantly review them in-house to make sure they're delivering what we thought they were going to deliver. You don't want to give up on them too soon. At the same time, you can't fall in love with them, as I alluded to earlier.
So lastly, just a few slides on the takeaways and then I'll turn it back to Jan-Michiel. We sincerely believe there's ways to unlock value for shareholders with this portfolio that we've got. We're not afraid to try different market models, different ownership models. We collaborate with our clients where we believe we're providing more and more efficient access. And we're also very proud of the role we play in thought leadership and I'm going to give you one example of that on the last slide. How we do that is by staying close to the clients, by being as flat an organization as we can so we can make decisions quickly, always being focused on cost, always making sure if we're going to bolt on an acquisition, we can integrate it effectively and quickly. Not settle for anything less than world-class technology, and as I alluded to a minute ago, running it with a one firm mindset, not with the siloed mindset.
So we'll go back to where we started. It's about growth, it's about efficiency, it's about strategic capital deployment. That's how we're going to continue to drive the strategy to try to continue to add value. So I want to close with something that, to me, reminds us that we are not the normal public company either, right? I don't have the normal public company CEO job. You are not shareholders in a normal public company. You are shareholders in a public company that is also counted on by the world to do other things that the normal public companies are not counted on to do. So this jobs initiative called the Big StartUp that we just launched, this is our way of being a leader. This is our way of being a thought leader. This is not about, I'm going to be very honest with you, it is not about driving companies to list here. That's not what this is about. This is much more about Main Street. And what we've said to a lot of our companies is there is a problem in this country and others on Main Street, that problem is unemployment, right? The government is not positioned in most countries, including this one, to implement policy that drives at a solution for that problem. And we've said to all of our big companies, "Hey, guys, last time we checked, all of you started as small companies one day. Main Street businesses in this country are 99% of the businesses in this country, right? They're the ones that need help. And we believe a lot of our companies organized by us and with the right partners in the microfinance world and the entrepreneur's world, et cetera, we can help those -- point the big companies in the direction to help the small companies. It can be through procurement opportunities, it can be through simply repurposing social responsibility and having your people in the field teaching small businesses on how to be more successful. It can be showing them how to have a web presence. It can be teaching them how to have a more effective tax and accounting policy. It can be UPS or FedEx going in and helping them be more efficient with their logistics. Every one of those things help those small businesses be more successful, which means they hire more people and then hopefully we can get this thing going in the right direction. I'm going to give you one example to bring it to life, and I'm the first admit it's very idealistic. But we had our first meeting around this, our first gathering, if you will, in Atlanta just about a week ago. Home Depot was one of the companies who was there, and Home Depot sent some of its people who make the decision of what gets on the shelves at Home Depot globally. We gave 8 small business owners an opportunity to each spend 30 minutes with Home Depot. Four of those got far enough that they now get to present to a bigger group at Home Depot, and Home Depot has suggested that 1 or 2 of those small businesses is going to end up having their products on the shelves of Home Depot in the coming months. I want to be very clear, yes, I know we need to do that about 1 million more times to make a difference, okay? But that is a life-changing day for those 2 companies to get that far, life-changing, right? They will grow, they will hire more people. And if we can try to replicate that story with our great community around the world, I think that's us making a difference. Do I really think that's going to drive the bottom line of our company? I'm the first to admit that it might, but I don't really think so. That's not the purpose of it. This was about trying to help solve a problem. A lot of people these days are in the problem identification business. We want to be in the solutions business, and I think this is a great way where we can galvanize our community, gets them closer to us. I think we can have some shared success.
Thanks for listening to me. I'll turn it back to Jan-Michiel. Thank you.
Thank you very much, Duncan, for -- which I believe is a very exciting presentation which will certainly be helpful to all our shareholders to show how you and your management team are trying to drive the company forward and create value for the company and of course, for the shareholders. Well done. We can now turn to the formal business of the meeting. New York Stock Exchange Euronext Corporate Secretary, Janet McGinness, will serve as secretary of this meeting. At this time, the secretary will present the affidavits regarding notice of this meeting. Mrs. Secretary?
Janet L. McGinness
Mr. Chairman, I submit the affidavit attesting to the fact that on March 26, 2012, notice of this meeting was given to the stockholders. In addition, there is present, at this meeting, a certified list of those stockholders eligible to vote. I also state that representatives of McKinsey Partners who have been appointed by the Board of Directors to act as inspector of elections at this meeting are present, and they have taken their oaths.
Thank you, Janet. On behalf of the Board of Directors, I would like to thank the stockholders who returned their proxies. We have a proxy committee that votes proxies as instructed by stockholders, or if no instructions are given, votes as recommended by the Board of Directors. The proxy committee is comprised of myself, Duncan, Dominique and Marsh. Janet, do we have a quorum?
Janet L. McGinness
Yes, we do. Holders of at least 215,235,937 shares or 83.53% of the company's outstanding shares are present in person or by proxy. And we may proceed.
Thank you. 83%, that's, I believe, a very high percentage, also historically for this company, and it shows the involvement of the shareholders with the affairs of this business and this company. We will begin with some matters requiring stockholder action that are as set forth in our proxy statement.
First proposal is the election of 16 directors, each of whom has been recommended by the board. The directors who are standing for reelection include myself, Duncan, Dominique and Marsh here on this table, as well as those whose name I will now call. Directors, could you please stand as I call your name? Mr. Andre Bergen, Mrs. Ellyn Brown. Ms. Patricia Cloherty is on my list, but she cannot make it because she did not feel well and she is not attending the meeting. Sir George Cox, Sylvain Hefes, Duncan McFarland, Jim McNulty, Ricardo Salgado, Bob Scott, Rijnhard Van Tets and Sir Brian Williamson. Jack Tai is also standing for reelection, but he is unable to attend this meeting in person due to a serious conflict.
The proxy statement lists all the nominees and describes their backgrounds and unique qualifications. No other individuals having been nominated in accordance with our certificate of incorporation and bylaws, I declare the nominations closed.
As set forth in the proxy statement, the board has recommended their vote for each nominee. As we noted in our proxy, in 2011, Mr. Salgado did not attend 75% of the meetings of the board and the committee on which he served. Mr. Salgado holds a key position as Vice Chairman and President of the Executive Committee of Banco Espirito Santo, Portugal's largest bank, which, as you probably all know, in 2011, required him to focus on managing the bank's navigation of the European debt crisis. I was referring to the European debt crisis that you all know of, not so much of the Banco Espirito Santo situation. He also actively participated in the high-level European regulatory and political discussions about how best to resolve the crisis. Mr. Salgado attended a number of joint meetings of the European Commission, European Central Bank, International Monetary Fund, as well as meetings with the Bank of Portugal and the Portuguese Banking Associations to implement the new requirements imposed on Portugal and its banking sector, of which his bank was a very, very important participant, of course.
In 2011, the board held a significant number of special meetings in connection with the proposed business combination with Deutsche Börse, which were not part of the regular meeting schedule, and were often called with little advance notice, sometimes even with one day or at most, 48 hours' notice. It had to be done. Mr. Salgado's intensive efforts to address the crisis restricted his ability to attend certain of the significant number of special board meetings, but Mr. Salgado participated in almost all -- no, he participated in all major decisions of the board concerning the proposed business combination. He was kept apprised of developments regarding the transaction through communication with his fellow directors including his Chairman, management, outside advisers and attended all but one of the regularly scheduled meetings of the board and the committee on which he served. Nevertheless, Mr. Salgado has perfectly pledged that for so long as he is permitted to continue to serve as a director, he will attend at least 75% of all future meetings unless he is able (sic) [unable] to do so by reason of illness or family emergency. Furthermore, if he defaults on his pledge, he has agreed not to stand for reelection at the company's 2013 annual meeting. I give you this fairly elaborate background in order to explain his particular situation.
The second item is a proposal by the company to ratify the audit committee's appointment of PricewaterhouseCoopers to serve...
Mr. Chairman, do we have a discussion on the election of directors?
No, there's -- no, because it's closed.
Candidates have been nominated. That process has been closed and now you can vote on this -- on the proposals. I look now at our corporate counsel during the Q&A at the end of the meeting. At the end of the meeting, you have opportunity to ask questions also on this subject.
On the election of the directors?
On the election of directors, sure, because that's on the agenda.
The second item is a proposal by the company to ratify the audit committee's appointment of PricewaterhouseCoopers to serve as our independent auditors during our fiscal year ending December 31, 2012, and I hereby introduce a proposal. As set forth in the proxy statement, the board has recommended a vote for this proposal.
The third item is the say-on-pay vote, the advisory stockholder vote on the executive compensation. Stockholders are being asked to vote on the following resolution: resolve that the shareholders hereby approve the compensation of the NYSE Euronext executive officers named in the summary compensation table as disclosed pursuant to Item 402 of Regulation S-K, which disclosure includes the compensation discussion and analysis, the compensation tables and other narrative executive compensation disclosures.
As set forth in the proxy statement, the board has recommended a vote for this proposal. We seek your support on this proposal because we believe we have a comprehensive executive compensation program that's designed to link our executive compensation closely with the company's performance and to align the executives' interest with yours as stockholders. Certain proxy advisory firms have recommended voting against our say-on-pay proposal based, we believe, on their perception that there is a misalignment between our executives' pay and performance. Our compensation structure for our executives is designed to incentivize superior performance. The compensation committee thoughtfully exercises discretion to take into account the totality of factors when determining individual compensation amounts. I don't have to remind you that all these directors, all these committees, are fully independent. While we do not follow a formulaic approach in determining individual compensation, amounts our compensation committee deliberately thoughtful on executive contribution to strategic objectives.
In determining 2011 compensation, we considered the following: Our 2011 core financial results were strong, as Duncan has shown you a few minutes ago, and were not adequately reflected by an isolated focus on total shareholders return. Our compensation is competitive and retentive based on an assessment against our peer group that appropriately reflects the global complex nature of our business, our competitors and the competitive market for talent we operate in. Our compensation committee reviews best practices and takes those into consideration in formulating the plan. With that in mind, we believe our recent compensation actions with respect our CEO compensation were taken with the interest of our stockholders in mind and consistent with strong corporate governance practices. We continually monitor our executive compensation program and modify it as needed to strengthen the link between compensation and performance and to reflect the dynamic global marketplace in which we compete for executive talent. Although this proposal is not binding upon the company or the board, we will carefully consider the stockholders' reactions and vote on this matter.
The fourth item is a stockholder proposal from Mr. Kenneth Steiner regarding the power to call special meetings. At this time, I call upon Mr. Steiner to present his proposal. Mr. Steiner, I wish to remind you that there is a 2-minute limit, and that we ask that at this time, you confine your remarks to your proposal. Any additional remarks can be dealt with in the Q&A session at the end of the meeting. Mr. Steiner?
Thank you. My proposal is on Page 67 of the proxy statement. My name is Kenneth Steiner. I own 2,000 shares of this company. And my proposal reads as follows: Resolved shareowners ask our board to take the steps necessary unilaterally to the fullest extent permitted by law to amend our bylaws and each appropriate governing document to give holders of 10% of our outstanding common stock the power to call special shareowner meetings. Special meetings would allow shareowners to vote on important matters such as electing new directors that can arise between annual meetings. The shareowner input on the timing of shareowner meetings, I believe, is especially important when events unfold quickly as they have at this company and in others, and issues may become moot by the next annual meeting. This proposal, of course, does not impact our board's current power to call a special meeting, which they have. I believe that shareowners, up to 10% of the outstanding stock, should have the ability to call a special meeting. I understand that the board saw the results of last year's vote, which was a winning vote on my part and has decided to make some changes with regard to this next year. They will propose a higher threshold, I understand, which is better than nothing. But I believe that the 10% threshold is the appropriate one. I don't believe that any group of shareholders that large would act irresponsibly, and I believe we would use our proper judgment to only call a special meeting to deal with legitimate and important topics. So I would urge my fellow shareholders to vote for my proposal on special shareowner meetings.
Thank you very much, Mr. Steiner, for this explanation. As set forth in our proxy statement, the board has recommended to vote against this proposal. But NYSE Euronext is strongly committed to good governance practices and is keenly interested in the views and concerns of our stockholders like Mr. Steiner, who has the best interest of the company at heart. Further, we agree that stockholders who, alone or together, hold a more significant stake in our company should be able to call special meetings, when circumstances make it necessary provided the matter proposed to be acted upon would not subject NYSE Euronext to possible regulatory sanction or disadvantages. To this end, the board indicated its intent to submit a proposal at the 2013 annual meeting seeking stockholders approval for amendments to our charter and bylaws to permit stockholders to call special meetings subject to the need for regulatory approval from the U.S. Securities and Exchange Commission and the European College of Regulators. So you see, we're going in your direction, and we'll come up with specific proposals for next year's meeting.
The polls are now open, and we'll proceed to the voting. Are there any questions related to the specific items up for vote. I remind you there will also be a general Q&A following the formal part of this meeting. Yes, sir?
James Rothenberg [ph]. I'm the managing member of Complex Enterprises LLC in excess of 50,000 shares. A couple of points that with regard to the matters that you've set forth. First, with regard to the directors. I have a series of questions. First, the board -- the company positions itself as a global company. Notwithstanding that, the board is entirely Euro-Atlantic. There are no board of director members from Canada, Mexico, China, Brazil and India. Is there any suggestion that the board modify its policy to include such directors, and particularly note that the Shanghai Exchange intends to control as much as 25% of the world market. I know Duncan's been in China. It's significant that we establish that relationship. With regard to the stock repurchase, did the Board of Directors receive information comparing a dividend model versus a share repurchase model? What I have specifically in mind is that there are dividend screens that show, and I think it's been well-established on empirical evidence, that dividend models, that increasing dividends annually is better than stock repurchases. And frankly, on Page 85 of your prospectus you show what you bought so far, approximately $27 a share. The remaining amount that could be bought is another $20 million, $25 million. It's a drop in the bucket. Increasing the dividend every year would substantially increase the price of stock based on empirical evidence. Third, with regard to the merger, the part of the -- the 10-K also shows that $85 million was spent in legal expense. The question is, based on Duncan's presentation last year which he's reintroduced this year, is there was the possibility of a plan b, an indirect approach as opposed to a formal merger that would salvage some of that legal expense, and I'm thinking specifically of what Duncan mentioned last year in terms of clearing and margin. Could and did the Board of Directors receive information that would have permitted a joint venture because of the disapproval of the merger? Fourth, in terms of buying, Duncan's related to that, over-the-counter stocks or NASDAQ stocks that will not list for a variety of reasons that are well known, is there any consideration, has the Board of Directors considered listing those stocks on the ARC Exchange specifically because we have aggressively said we're going to compete in every form, let's put those stocks that refuse to list on Arca and trade them electronically? And finally, fifth, Duncan's mentioned BlackRock. Yes, that's the fourth market. Has there been any initiative to seek to clear any fourth market volume that BlackRock is seeking to put together because they think the spreads are better? All those information items. Thank you, Mr. Chairman. I appreciate your time.
Thank you for your questions. I will deal with the first question about vertical position and I think Duncan and possibly the CFO will deal with some of the other questions. Basically, your remark was we're a global company, as we have explained. And as Duncan has shown, we're in various places where we do business. Should our board be even more international or global than it is at this moment? I think it's probably fair to say that we're one of the most international boards around. We already have 7 nationalities, European nationalities, U.S. nationalities, and basically, we have an ample reservoir of suitable candidates to pick the best from. That's one. You mentioned China. We do not have a Chinese colleague on the board. We have -- it's a pity he's not here. He is in China, in fact, at this moment because he's going to be appointed to Bank of China board, which is very prestigious position. He is Chinese. He knows China intimately. He has worked there as a banker for many, many years. He's an American national, lives here in New York and already in the 1 year that he has been with us he has been an extremely valuable board member. I can assure you that also in the context of future planning of board composition, we will very much consider the possibilities of further broadening the board and the expertise pool that we have. Having said all that, we have to deal with territory requirements that the regulators impose on us and the restrictions that they impose on us.
Duncan L. Niederauer
And thanks for the questions, Jim. I'll start with the stock repurchase dividend question, and then I may ask Mike to add a few things also. In all these efforts, Jim, you're always trying to strike the right balance, right? So I think our view, when we polled the shareholders, was that stock repurchase was something you could reenact immediately. It wasn't going to require -- there was no time that had to be spent thinking any more about it. I think our feeling at the time was with the dividend yield, where it is and with the stability that we've proven, as you know, we're not singularly focused on what percentage of the payout ratio it translates to; we've kept it pretty steady. I think our view was the best thing we could do in the near term was reinstitute the buyback. I think your point's a good one, striking that right balance between, do you increase the dividend and reduce the stock repurchase. How do you strike that right balance, it's well said. Mike, do you want to talk about any of the studies that we did when we made that decision and how we think about that stuff generally, and then you can kick it back to me for the other question.
Sure. I mean, as Duncan mentioned, the yield is one of the highest in the group. And we kind of see the dividend as a commitment that we look at over the long term as well. So when we -- when and if we do the increase in dividend, we like to believe it's going to continue to be increased, it's not just utilizing a strong cash flow of a particular year. So we do ask people and we guide people to look at the payout ratio, which historically has been in the 35% to 45% range. As Duncan mentioned, when it -- a couple years ago, when our earnings were down and it rose into the 50s, we kept the dividend at those levels. We continue make progress to the payout ratio using 2011 profits. It was 47%. And we're pretty much saying publicly that if we can continue to bring that a little bit lower, we would be in the zone where I'm sure the board would evaluate further dividend increases.
Duncan L. Niederauer
And Jim, if you could do me a favor and send me that study that you were referencing, I'm happy to do some more work on that, too, because that's -- so just send me an e-mail or something with that, I'll be happy to review it, okay? The third question I think you were getting at was, during the merger, did we also think about alternatives where instead of doing -- and if I'm not rephrasing this properly Jim, please correct me, where instead of -- were there are alternatives to partner with our merger partner in a way that was not a full and complete M&A transaction. I think there are certainly things we would not rule out in the future. Most of them as you were -- if what you we were getting at was are there opportunities to partner in the post-trade space, for example, we're open-minded about all those things. I did not think, quite honestly, that during an attempt to consummate the merger, it was the right time to start talking about those alternatives. I think that would have sent the wrong kind of message. We certainly believe, as we would -- and by the way, not just with them but our willingness to collaborate, I don't believe just extends to our clients because, as many of you in the room know, a lot of those clients also compete with us in other venues, too, because they're able to, right? So a lot of the dark pools, et cetera, that have been constructed are owned by some of our clients. We have no hesitation to JV where it makes sense. And I think if you look at, as evidence for that, look at how the NYPC partnership is evolving, that also is a little bit adjacent to your fourth market question. But realistically, that's further down the road for us when all that -- I think we have to have those assets under our wing a little more than we do. But if you think about that, that's a joint venture. It's on its way to being a joint venture with DTC, ourselves, LCH and some of the primary dealers in the swaps market. I think that's an -- we should all get used to the fact that that's probably an illustration of where a lot of these new businesses are headed. I'm sure most of us in the room would agree that a lot of what has heretofore been traded and cleared in opaque places is going to find its way to a more transparent market. The other thing I would remind all of you of is the banks will have a lot to say about the protocols for those new markets. And I think it is going to be challenging for someone in our industry to think that they can do it by themselves without the banks. I think you're going to have to collaborate with the key partner's buy side, sell side and some of the infrastructure providers over time. In terms of your last question about Arca, I think I'll let -- if we can get Larry the microphone. If you're talking about what we already do on Arca, all those stocks are already traded on Arca and I think Larry can give you a little insight to sort of the volume we do in Arca and what stocks we trade. But I don't know if we necessarily need to take the step to list them. We're already trading all those instruments on Arca, but why don't you field that for Tape A and Tape B.
Yes. I think you hit that, Duncan. So first, on Arca, we do trade all the stocks that trade in NASDAQ. We trade all the NMS stocks including what we trade on the New York Stock Exchange and ETFs, which we have somewhere around a 90% share of listings. Arca has had a history of having a hard time getting NASDAQ stocks listed there. We had a small number. We've had significantly more success, either getting NASDAQ stocks transferring over to New York now, because the days of tech companies not wanting to come here, that number, 63% of new IPOs. Tech companies coming here shows the momentum and the transfer momentum, not just the big stocks like Teva and Ameritrade, but a lot of the smaller tech companies as well. So we think we're building the momentum and confusing the marketplace with another brand would be counterproductive to us just when we're getting that momentum. Using the community that we have, using the visibility and branding that we have and using sort of the goodwill that we're starting to reach in Silicon Valley, in Israel and in other places like that where, look, it takes a while to dispel people's notion that the New York Stock Exchange is not a tech place. When I first started going to Israel a few years ago, they thought the market was NASDAQ. Now their largest cap stock moved here. That's not been lost on people. So I think it is momentum rather than confusing with a new listing venue.
No, no, it's under full UTP trading privileges, meaning it is unlisted, meaning it's not a listing. But it trades under all UTP rules and NMS rules. And the dual listing route, when you say to a NASDAQ stock also pay a listing price to another venue, we think confuses shareholders, confuses institutions, confuses the indexers. And in fact, we do not recommend that even with respect to New York and other venue.
Duncan L. Niederauer
All right, Larry. I have to cut you off, I'm afraid, because in view of the time, we have to proceed with voting. If you would like to vote by ballot, please raise your hand. An usher will deliver a ballot to you. If you have already voted by proxy, either by mail, phone or Internet, there's no need to vote by ballot now. However, if you want to vote in person at this annual meeting or change your vote, you may do so now in person or via the special meeting website.
Are we ready to vote? It's now time to close the polls. Please vote. Has everybody had an opportunity to vote? We're not missing anything here. If you have completed the ballot, please raise your hand, and an usher will collect it. I see no raised hands. The polls are now closed.
While the inspector is counting the votes, I would like to introduce the NYSE Euronext Management Committee. As noted before, Duncan Niederauer is CEO; Dominique Cerutti is President, Deputy Chief Executive Officer; and the following people are also members of NYSE Euronext Management Committee, and please stand for moment if I call your name: Roland Bellegarde is hard at work in Paris as he should be, so he is not here; Mary Brienza is here, our Chief Risk General EVP dealing with risk management, very important job; Philippe Duranton, Group EVP, Head of Global HR; Michael Geltzeiler, our CFO; Jan Halvey, General Counsel; Mr. Luis de Sousa, Head of the Euronext Lisbon Exchange; Catherine Langlais, General Counsel in Europe; Larry Leibowitz, Chief Operating Officer; Cees Vermass, CEO of Euronext Amsterdam.
Can I now ask the inspector to present his report? Is he already ready?
Due to the volume of proxies and ballots, it will take until tomorrow to verify the votes and tally the final count. However, based on the proxies tallied and verified prior to the meeting, I can confirm that a quorum is present and that each of the director nominees received a majority vote except Mr. Salgado. The appointment of PricewaterhouseCoopers as independent auditor has been ratified. The say-on-pay vote, the advisory stockholder vote on executive compensation indicates that the stockholders have approved the proposal and the stockholder proposal regarding special meetings has been approved.
Thank you very much. The final vote results will be posted on NYSE Euronext website as soon as possible in the Investor Relations section and timely reported on a Form 8-K filed with the SEC. Let me say a few words on the voting results regarding Mr. Salgado. The formal part is, as part of the requirements of our bylaws, Mr. Salgado will tender his resignation to the board, and the board will then discuss and review his resignation. Mr. Salgado will continue to serve on the board pending the board's decision on whether to accept his resignation. Let me again emphasize that we have tried to explain to you the very special exceptional circumstances under which Mr. Salgado has had to operate. And there is no doubt in our minds whatsoever that he has always tried to serve the best interest of the company. As for the result on say-on-pay, the Board of Directors takes the shareholders' vote very seriously. And given today's vote, although we haven't seen the numbers yet, the company will be consulting with representative shareholders to understand and address their concerns as we have done so over the last few weeks. We note that we met with many of our shareholders during the proxy solicitation process to discuss compensation, and we truly value the feedback.
Having concluded the legal meeting requirements, I hereby declare the formal meeting adjourned. And we'll now turn to the Q&A session. If you wish to ask a question, please again can raise your hand, wait to be acknowledged and identify yourself and the number of shares. Mr. Steiner?
You promised me before I can now make my statement with regard to the directors. And I have a few other matters. I will keep it within the time limit. I recommend, although it's too late to vote now, but I voted against this Board of Directors and its management representatives, and I will tell you why. I'll preface my remarks by saying it's not with any ill will, I will assume, and I think it's a correct assumption that the directors and the managers work hard and mean best for the company. However, in my considered opinion, their performance and your performance over the past several years clearly indicates to me that these directors are not the appropriate people for the job. The company and its shares have significantly underperformed the market and its peers for a long period of time. This is on Page 44 of the 10-K, if anybody wants to look it up. The merger proposal, which I spoke against last year with the German exchange, I believe, was a disaster, a waste of time. Tens, if not hundreds of millions of dollars, caused damage to our company and its reputation and caused us to miss other potentially beneficial opportunities that are probably now gone. The yield is high, as you continually mention, not necessarily because the dividend is so great but because the stock has been a state of near collapse for many years. And I think it's down over 10 points from last year's meeting in what has been a bull market. Unfortunately, bonuses and compensation have gone up as the stock and shareholder returns have gone down. We've had generous bonuses and salaries, including to the CEO, a multimillion dollar bonus, which is on Page 52. To me, this is like giving the captain of the Titanic a bonus after he hits the iceberg. I believe the board should remove the current top level of management and replace them with people more confident who don't just give us PowerPoint presentations and long-winded speeches every year and empty promises, but who deliver actual shareholder return. I believe that the directors should resign and allow the shareholders to replace them with a better group who can rescue what is now a flailing enterprise. Last year, as I say, I voted against the directors and the merger. My fellow shareholders, unfortunately, didn't listen, and you've paid for it with severe losses. This year, I urge you more emphatically to vote no, if you ever get a chance at a special meeting against the directors, vote for change. I believe it's our only hope for a more prosperous future at this company. Thank you.
Thank you, Mr. Steiner. As I say, we respect your opinions. We beg to differ, of course. You have heard about the performance last year in terms of financial performance, top line growth, earnings per share, those have all been positive. It was indeed not reflected in the share price, as Duncan has also explained. On the Deutsche Börse situation, this was a very attractive transaction which was approved by the overwhelming number of shareholders. We proposed this on this side of the Atlantic, on the other side of the Atlantic. Yes, the outcome was disappointing. It was somewhat unexpected even, and the best thing that one can do in life then is don't sit down and weep, but pull yourself together, look at your strategies, start executing, get everybody working very hard. And that's exactly what is happening and the Board of Directors has full confidence in the management team to do this and to create value the future. Let me first go -- yes, sir.
My name is Steve Solomon [ph], and I own north of 15,000 to 20,000 shares. My comment -- and I'm a retired individual and to some degree -- to a large degree, in fact, the amount of the dividend is very important to my wife and I, and I guess that would be the same to other retired individuals. I note that when the deal with the German's Deutsche Börse collapsed, I believe they gave their shareholders a special dividend compensation for the waste of time of a year. With regard to amount of the dividend, it's my recollection, and you can correct me if I'm wrong, that in the last 5 years, the dividend has probably gone from $1 to $1.20. It looks better as a percentage of the stock price today. And because as the man indicated, obviously, the stock price has collapsed. So that at the same time, I believe, the cash flow that the company throws off is a lot larger at this point than your profit. So I'm not sure -- it was indicated that the dividend is 40-some-odd -- 47% of earnings. But if you measure it probably against your free cash flow, it's probably not in that ballpark. So it seems to me that you people are doing a good job. I have no problems with what you're doing to the extent that you're developing your technology company, hats off to you. I mean, that's a real gem. But I would urge you, on behalf of people, again, who, to some degree, to live off the dividend and who are less concerned with where the stock goes, your buybacks probably drive your earnings up somewhat and maybe that flex in the stock price. But not all of us are in this for trading it on every couple of points. So on behalf of retired people who would appreciate an increase in the dividend, I urge you, to the extent that you are open to it, to consider a dividend, a special dividend as did your proposed partner in Europe. Thank you.
Thank you, sir. And yes, we have listened very carefully. We, of course, agree with many things that you say here. The special dividend was indeed announced in the context of the combination with Deutsche Börse in a different context looking at the combined sheets and there, we must admit, that the Deutsche Börse had a very, very strong balance sheet and there was, on a combined basis, even more room for free cash flow distribution to shareholders than in the case of NYX. But there's no combination so we look at our own policy at this moment. As you know, the 30% -- $0.30, sorry, per quarter is not only a high-yield, but also a payout ratio depending on which cash flow definition you use, 45% to 60% or so, Mike, correct?
And we also share with the board, and we do look at and appreciate that our cash earnings are higher than our net earnings. So that goes into the consideration for dividends.
And indeed, as Duncan has shown, it's one of our 3 top priorities, strategic priorities, capital efficiency and returning wherever possible, within reasonable limits, free cash to shareholders.
Jim Carty [ph], former member of the New York Stock Exchange, owner of 303,097 shares. Duncan, I'd like to have you consider enhancing the stock buyback. Dividend is fine, 47%, that's very generous. As has been mentioned, the stock is languishing. It's a great time to buy back stock. I realize there's a $550 million buyback by the end of this year. I like to see that you consider having that completed in the next 2 or 3 months. And then announce another $1.5 billion to $2 billion buyback at some future date. There could be a geopolitical event that could topple the markets, and we'd be in a position to be able to go in and purchase a lot of stock at a low number. If you just simply look at the low of the stock for the past 3 years, to purchase stock at that value would be a tremendous asset to increasing earnings per share. So I'd like you and the board, Duncan, to consider another more generous buyback over the next 3 years with the goal of trying to get the shares -- total number of shares beneath $200 million.
Thank you for your comments. Sir -- and then I think we'll take 2 more questions because then we have to conclude the meeting.
My name is David Shields [ph], I own 85,000 shares. And I would just like to make the comment that from my perspective, I thought the effort put into Deutsche Börse was extremely good, very creative. It would have created the third silo for derivatives around the world. It would've been a big thing for the New York Stock Exchange, for Deutsche Börse, but more so even for Europe. I think it was tubed by one man. I think Joaquin Almunia had a personal ambush against that merger. And I think that he was dead set against it, and I don't think there was really too much of anything that we could have done to persuade him otherwise. Unfortunately, he was able to convince a lot of people, like Iceland, that had nothing to do with this thing, no interest in this thing, to vote against it. And I think to discredit this board and the efforts of Duncan Niederauer is misguided and I did support that effort, and thank you for trying.
Thank you. Yes sir, there?
My name is Joe Rose and I own 100 shares. And I had a couple of questions for Duncan related to growth opportunities. First of all, in a more general level, is there a group dedicated within the organization focusing on new products, looking for new products, thinking out of the box? And in particular, I'm interested if they've looked at anything dealing with insurance industry, insurance-linked securities, which a lot of people think is a tremendous growth opportunity.
Duncan L. Niederauer
Okay. Joe, nice to see you. There is a -- we have a group attached to our strategy team that is the -- we call innovation champions, and a lot of those ideas are kicked around there. You've known me a long time. My philosophy is not every idea is a good idea. But you should listen to all ideas because you're never sure where the next one's coming from. We have kicked that insurance idea around specifically in the past. I think it is another example like where you saw us make an investment in a commercial JV with the receivables exchange last year. I think there are a lot of products out there like that, that lend themselves to a different kind of price discovery mechanism. And in theory, you would say that matching buyers and sellers is meant to be in the DNA of this institution for the last 200-plus years. So that has made it to the list. I wouldn't say it's near the top of the list. We think there are other asset classes that are a little more attractive that we're likely to get into before the insurance or reinsurance space.
The lady in the back there. And I guess that will be the last question.
My name is Mavis Rhode [ph] and I own 80,000 shares of NYSE stock. I'm very pleased with the return of capital. I was happy about it. I thought it was a very good thing. Are you going to do it again in lieu of a dividend raise? I'm just curious to know about that.
Duncan L. Niederauer
Right. As I think we mentioned in -- following up on Jim Carty's comment, too, the dividend's been stable. The buyback is -- it was a $1 billion buyback when it started. We've announced how far we've gotten in terms of what's outstanding on that and then I think they're -- I think we'll take Jim's comment to heart that when that one's completed, is there more to do there? We certainly think if the macro environment recovers, we'll have the opportunity through the free cash flow generation to consider all options like that. I am hearing a difference of opinion in the room and we'll have to do some more work to understand what's the right balance of buybacks and dividends. But I think we've got -- we're trying to go down both paths and just trying to strike the right balance.
Is that the last one?
Duncan L. Niederauer
One question, Jim, or is it a -- if it's a 7 parter, you and I can meet later.
No, no, this is just a completely different subject. I'm talking about cybersecurity, which has not been raised in this meeting. Specifically, this relates to last year. We talked about the SEC rule, you can go down 30% a day, 3 days and the market could be wiped out in 4 based on the former index. And I discussed last year the question about distressed markets and options in future cellular discount and arbitrage. More significantly, I was involved in an arbitration this year that involved DMA, direct market access devices that are worldwide. Basically, you can trade an enormous amount of stock within a minute. And the problem here is that if someone either hacks into that system or you get a rogue trader, you can tag the mark and you can tag it viciously, and this 30% rule is too high. Congress has under consideration right now a Cyber Intelligence Sharing Protection Act. I don't know if we've made any comments on that, but this is directly related to what is immediately before the House of Representatives right now. What I urge is that the Board of Directors, on an expedited basis, go to the SEC and the Congress to say this is just too risky. Chairman Brendan of the -- Director of National Intelligence, indicates the next war we're going to fight is a cybersecurity war. So this point has not been discussed in the meeting, has not been discussed in any meeting that I'm aware of, but it is of the highest priority because if we tank the capital markets, we're all out of business. And I urge some immediate action in the cybersecurity area.
Duncan L. Niederauer
Okay. Let us tell you what we've already been thinking about and doing and I'll let Larry take it.
So the good news is the immediate action you've asked for we've done, no. There's actually 3 parts to that. First, the sponsored access rule implemented by the SEC that finished, I think it was in November of last year, actually required risk controls on all brokers introducing orders to the market that would prevent rogue traders from knocking them -- from substantially going beyond, for example, credit limits and things like that. Second of all, the SEC already is working on a proposal to tighten the market-wide circuit breakers so that the 30% is -- will be far tighter than that. Final piece is really on -- specifically on cybersecurity. We are actively engaged with all levels of government, and we actually do have people within our organization that have security clearance to discuss that with government. We are actively engaged with the SEC on the proper measures, not only for our organization, but for the industry to do tighter protection on that. We take it very seriously. We review it with our board, with our reg board and with the government officials. So we hear you and we agree, and we are trying to be as vigilant as we can. Understand that you can never be complacent with this because there's an awful lot of people out there who are very smart, always looking for the next way.
Thank you, Larry. And just to add, the subject has of course, the attention in the U.S. and Europe is the same situation. I'll now close the meeting, and thank you all for coming and your continued involvement.