Cramer’s fear of a NYSE Euronext dividend cut is understandable. A onetime Mad Money favorite, this stock has dropped to just $19 from over $100. Short sellers have driven the share price down, while the recession hurt the volumes so essential to the exchange’s profits.
But CEO Duncan Niederauer told viewers on Wednesday that his payout is “intact for 2009” and NYSE has “no plans to change it.” That sentiment echoes a similar statement made by the company at a recent shareholder meeting.
“We thought that it was very, very important to send the right signal by maintaining the dividend level,” Niederauer said via satellite during Mad Money’s special 1,000th episode special.
And those declining volumes seem to have found a floor. In fact, March saw a return in volume growth. Euronext’s cash equities business was up 11% month-over-month, while U.S. consolidated equity volumes reached near-record levels: 12.3 billion shares traded a day. That’s a jump of 48% year-over-year and 12% from February.
Niederauer called the numbers “terrific,” adding that NYSE’s purchase of the American Stock Exchange has played a key part in the company’s growth as well. So investors can’t value NYX on just the stock changing hands on the trading floor.
The CEO also said he was “very encouraged” by new Securities and Exchange Commission Chairwoman Mary Schapiro and the proposals she’s put forward for a reinstatement of the uptick rule. This rule prevents traders from selling a stock short until it first ticks up in price. The absence of this regulation, Cramer has said, is a big reason so many companies have been driven out of business by bear raiders.
Still, Niederauer doubts the original uptick rule will return. Instead, he’s expecting some variant of that. The NYSE and other exchanges have suggested to the SEC their own version of the rule, which Niederauer said is stricter than the original. In the end, though, he expects some kind of price test to make its way back into the market. The question will be whether that rule is in effect all the time or just during periods of stress in individual stocks.
When asked how new short-selling rules could affect ultra-short exchange-traded funds, which turn a $1 investment into $3 in an attempt to generate bigger returns, Niederauer said they would have to be “reevaluated, potentially repositioned and maybe even reinvented.” The market is trading largely on psychology rather than fundamentals right now, and these funds kill investor confidence. So any rule making should be focused specifically on restoring that trust.
“And I think to do that, these rules have to be put back in place,” Niederauer said. “I think it’s just to make the market operate more fairly.”
“We always have to come out in favor of better run markets,” he said.
Cramer endorsed Niederauer’s efforts.
“We need the uptick rule,” the Mad Money host said. “We need to have retail people feel like they’re not getting ripped off everyday. I salute him if he does it.”
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