For Facebook, exchange choice is a matter of image
New York • When Facebook goes public in a few months, will its stock appear on the New York Stock Exchange or the Nasdaq? Depends what its billionaire founder prefers for a backdrop a trading floor on Wall Street or towering video screens in Times Square.
"Basically, it depends on where Mark Zuckerberg wants to get his picture taken," says Larry Tabb, the founder of the Tabb Group, a market research and advisory company.
Beyond that, it doesn't matter much. When a company signs up with the Nasdaq, its stock still trades on the NYSE, and NYSE-listed companies trade on the Nasdaq. In fact, more NYSE-listed stocks trade on the Nasdaq than on their home exchange, according to the Nasdaq.
The obvious difference between the two is image.
Nasdaq still has the upstart reputation. The home of Apple, Amazon.com and Google came of age in the late 1990s, when day traders banked on dot-com stocks turning them into millionaires overnight.
The NYSE is the stately symbol of the financial markets at Wall and Broad streets. The exchange dates to 1792, when 24 brokers and merchants gathered to trade stocks under a sycamore tree near its present home.
Its origins can be traced back even further. Dutch merchants set up trading posts near the wooden wall built to protect New Amsterdam from outsiders and established the area as a hub of trading in furs, food and slaves.
These days, though, the din of traders yelling to each other across the trading floor has mostly been replaced with the hum of computers. The floor serves mainly as a television backdrop.
Even if there is little difference between the two exchanges, the stereotypes still seem to matter for companies going public. The three largest initial public offerings of last year and the 10 largest of all time debuted on the NYSE.
Young technology companies with quirky names still flock to the Nasdaq. Last year, the exchange signed up Zynga, maker of the games FarmVille and Words With Friends, and Yandex, an Russian Internet search provider. LinkedIn and Pandora picked the NYSE.
The NYSE charges a company more upfront, and its fees are mostly based on how many shares a company has trading. The initial fee runs $125,000 to $250,000. After that, annual fees range from $38,000 to as much as $500,000.
A Nasdaq listing runs $35,000 to $99,500 each year, plus an initial fee. Facebook will have no problem affording either: It plans to raise $5 billion in its IPO an amount, incidentally, that wouldn't put it in the top 10 all-time for NYSE.
For the money, both exchanges offer similar benefits. They try to raise a company's profile through arranging conferences, lining up meetings with investors and analysts and running advertisements.
As for promotion, Nasdaq claims its MarketSite Tower next to Times Square is the world's largest stationary video screen, at seven stories high. A company that lists on the Nasdaq gets access to the tower, says Joseph Christinat, a spokesman for Nasdaq OMX.
"We can blast the entire bottom of Times Square with a company's logo," he said.
Then again, with more than one in 10 people on the planet logging on to update their status, post photos and find old friends, Facebook has little trouble getting people's attention.
Because stocks can be traded on either exchange, both NYSE and Nasdaq are bound to benefit from Facebook's debut, Tabb says.
NYSE Euronext, the parent company of the NYSE, makes roughly three-hundredths of a penny for every order of 100 stocks. More stock of a popular company translates into more fees.
Tabb estimates Facebook's stock could yield $500,000 to $1 million in trading fees each year, divvied up among the exchanges.
Picking an exchange doesn't even make a difference anymore in a company's stock ticker symbol. NYSE tickers used to have one, two or three letters; Nasdaq four or five. New rules allow either exchange to use up to five. Facebook has opted for two: FB.
To an investor buying a stock, there is little reason to care where a decent-sized company is listed.
Electronic trading keeps transaction costs low. Most orders travel through a dozen or more computerized exchanges scattered across the country, each competing for transactions by offering faster execution.