Wick burns with global ambition

THE run-up in the share price of the London Stock Exchange has raised expectations in the Square Mile that it could soon be in receipt of a takeover or merger approach from New York's electronic market, Nasdaq.

There is certainly no doubting the worldwide ambitions of Nasdaq and its recently appointed chief executive and chairman Wick Simmons, who is confident that the brand of his technology market has in no way been damaged by the meltdown of the sector.

'There is really no reason why Nasdaq shouldn't be the developer of the first global equity trading ever', Simmons proclaims in a conversation at Nasdaq's unprepossessing headquarters overlooking Times Square.

With most of Nasdaq's staff operating from computer centres in Connecticut and near Washington, the market has only the most minimal presence in New York and none at all on Wall Street.

Simmons shows disdain for the New York Stock Exchange's old-style floor and paper based trading, which he describes as 'great theatre.' He notes it takes 20 seconds to execute an order on Wall Street and two-tenths of a second at Nasdaq.

'We set out to build an Asian capability and then a European capability. Our intent is that individuals on any one of those Continents will be able trade stocks during daylight hours in the currency of their choice. Why shouldn't Starbucks shares be registered in Japan and in Europe?' he asks quizzically.

Simmons, a product of America's North Eastern seaboard financial aristocracy, recognises that this may not be the most auspicious moment for a transforming deal for Nasdaq, although he by no means rules it out. He firstly wants to have Nasdaq's new trading system, known as SuperMontage, running successfully before anything really ambitious is tried.

Secondly, he wants to get Nasdaq's initial public offering - the first by any US stock exchange - out of the way, so Nasdaq has its own currency and the means of valuing its business before fulfilling its expansion ambitions. 'We don't want to get slapped with a private discount,' he says.

There is little doubt that Simmons, brought in from US stockbroking firm Prudential Securities to mastermind Nasdaq's push towards flotation, is keenly interested in the LSE. Nasdaq's purchase of the weakling Brussels-based Easdaq market and its 50% joint venture with Liffe, the London futures market which is now part of Euronext, is seen as the warm-up act for the big event.

Easdaq, now Nasdaq Europe, was designed 'in a small way to get in on the game,' Simmons says. 'We decided to move in, take over their 60-to-70 odd listings, until we could bring up Super-Montage.'

Similarly, Nasdaq linked with Sir Brian Williamson at Liffe, because Nasdaq wanted to have a foot in the relatively new market for single share options. Unfortunately, despite having sunk 'about $25m bucks in it', the project has been held up because of a dispute between America's main financial regulators, the Securities & Exchange Commission and Commodities & Futures Trading Commission.

It is clear that Simmons, a tall, relaxed figure with an elegant drawl, has his eyes well trained on the developments across the Atlantic, and wants his next European venture to parallel the Nasdaq approach. This he defines as an 'open dealer platform' and 'a horizontal business as opposed to vertical business, where individuals who have orders can execute them in one place and clear them in another, and sell them in a third if they want to. This, I think, is the secret of the low cost nature of US markets.'

In making this point, Simmons all but appears to be ruling out an alliance or deal with the Deutsche Borse in Frankfurt (the LSE's previous possible merger partner) which has gone in the other direction by bringing trading, clearing and settlement within one market - or a single silo as the experts call it.

So is he talking to anyone in Europe right now? 'Absolutely - to Clara (Furse) and to Don Cruickshank.' And for good measure to British policymakers including Chancellor Gordon Brown , who has been very keen on bringing Nasdaq to London, and financial secretary to the Treasury, Ruth Kelly.

He notes that Werner Seifert at the Deutsche Borse has 'built his fort - London is the most international, and Euronext is doing its best to build some kind of Pan European capability'.

It is plain from his remarks that he is less than impressed by the integration process at Euronext, or the vertical model adopted in Frankfurt. This leaves the LSE firmly in his sights.

The key for Nasdaq, before it really embarks on its European ambitions, is SuperMontage, the new trading platform which is apparently capable of automatic execution of transactions of up to 1m shares.

Aside from improving the speed and liquidity of Nasdaq, the system is designed to end the leakage of business from Nasdaq to electronic trading networks such as the troubled Instinet subsidary of Reuters.

'When you look at a screen, instead of seeing just the best bid and offer, you will now be able to look five levels deep on either side of the best bid and offer,' Simmons says. It will also allow investors to keep trades confidential until the end of the session.

One of Simmons' aides passes me a report by Boston-based research group Celent, that argues SuperMontage 'will make huge gains by the end of its first year in operation'. It suggests that this 'is the moment of truth for Instinet', which may end up having to merge with one of its rivals such as Island, if it is to survive the squeeze coming from Nasdaq.

Simmons was born in Baltimore in Maryland in 1940, but spent his early years on the West Coast in California, where his father was serving as a naval officer. After the war, the family moved to Boston, where he attended Groton, one of the most elite private academies, before going to Harvard, where he majored in Russian literature.

But he failed to go the distance at Harvard first time round, and instead ended up in the Marines. It was a close call for the future head of Nasdaq. In 1964 he was packed and ready for Vietnam when Lyndon Johnson decided for the moment that he was not going to escalate the war.

Along his way to the top in Wall Street, Simmons accumulated a large family of five children and now five grandchildren. 'I have been married 38 years of my life,' he observes, 'once for 23 years and once for 15 years.'

Beyond SuperMontage, which has been years in the planning and cost Nasdaq several hundred millions of dollars, using the technology of its own customers, the market is preparing its flotation.

Simmons says an IPO will give it three things: 'The ability to raise capital, to have an acquisition currency, and the capability of rewarding our people with options. 'This is important because 75% of our people are techies and we have to compete for the best people,' the Nasdaq boss says.

Valuation, he believes, will be a 'composite' of the ratings currently put on rival stock exchanges in London, Frankfurt and Paris.

Although Simmons sees flotation as a pre-condition to a merger with a European exchange, he emphasises that he is biding his time waiting for market conditions to improve. 'We've got plenty of capital, and we're a profitable company. There's no reason to rush.'

His caution is understandable, given the questions still hanging over the tech sector. But with the European markets - notably London - anxious for a transforming deal, Nasdaq may have to get its skates on.