Big Board rustling after Nasdaq herd

After seven years on the Nasdaq Stock Market, Movado Group Inc. (MOV) in May made a timely move. The watch company switched its stock listing to the New York Stock Exchange.

“We were on their radar screen, and they did a good job marketing to us,” says Frank Kimick, vice president and treasurer of the Lyndhurst, N.J., company.

These days, making the switch is almost easy. While the Big Board has long tried to lure companies from its archrival, rarely has it had a stronger hand to play.

Ruinous slide

Spurred by the ruinous slide of the Nasdaq, and also the NYSE’s aggressive new listing and marketing strategy, name-brand companies are switching over.

So far this year, 29 companies, including such household names as E*Trade Group Inc. (ET), Krispy Kreme Doughnuts Inc. (KKD) and Oxford Health Plans Inc. (OHP), have made the move from the Nasdaq and the American Stock Exchange. That compares with 31 defectors in all of last year.

“It’s a pretty strong list of companies, and the list keeps growing,” says Patrick Healy, president of Issuer Network, a consultant on stock listings.

Success, though, is relative. Even as the NYSE gains ground against its rival, its business has been caught in the economic downdraft that has pummeled all of Wall Street.

Emblematic of the slumping market, the Big Board’s specialists – the firms that match the prices of buyers and sellers on the floor – saw first-quarter profits of $145 million, a 25.6% tumble from the same period a year ago.

Against that increasingly grim backdrop, the Big Board is redoubling its push for new listings. With gusto, it is playing up its carefully cultivated image as the home of blue-chip companies.

That contrasts sharply with the bloodied image of the Nasdaq, whose overall index has now plummeted 66% from its March 2000 peak, and where scores of companies have fallen so low that they have been delisted.

“I think that the disaster in the tech market not only destroyed a lot of people who lost a lot of money, but also destroyed the confidence that people had in the [Nasdaq],” says Richard Rosenblatt, president of an eponymous New York brokerage.

With such sentiment behind it, the New York Stock Exchange is moving aggressively to seize its opportunity. It has targeted 765 companies – 10% of all the companies that are listed on the Nasdaq and the American Stock Exchange, which became part of Nasdaq in the fall of 1998. Its top targets range from tech giants Microsoft Corp. (MSFT) and Cisco Systems (CSCO) to Starbucks Corp. (SBUX) and Staples Inc. (SPLS).

Observers predict that this year the Big Board likely will win a total of 45 Nasdaq companies. To grease the rails, it has made a number of significant changes.

For example, it has halved its initial listing fee to $250,000 – no small sacrifice for a market that derives 26% of its revenues from all listing fees.

The exchange also is casting its net wider by easing up on listing requirements. For companies of at least $1 billion in market value, the Big Board now makes an exception to its old rule and simply requires that they have at least $100 million in revenues. The old rule, which is still an option, mandates three years of profitability and at least $6.5 million in after-tax earnings.

The exchange also is beginning to become more market friendly. In the past, a company was assigned a specialist firm that would trade in its stock. Now, companies can choose from up to five specialists.

“Item by item, the NYSE is eliminating the impediments to companies moving, and what you are seeing is an increase in listings that are coming,” says Mr. Healy.

In an even more daring move, last year the Big Board drove its campaign for new listings into the very heart of Nasdaq country – Palo Alto, Calif. There, it opened a marketing office from which it will directly pitch to more than 100 Nasdaq companies in the surrounding Silicon Valley.

Last month, the 200-year-old market broke new ground entirely. It initiated trading in QQQs, exchange-traded funds that constitute the 100 largest Nasdaq non-financial stocks, and that are traded on the Amex. Already, the NYSE has captured 15% of daily trading in the securities.

Watch this space

Many see the intrusion on one of the Amex’s most profitable products as foreshadowing a number of new products.

Catherine Kinney, the Big Board’s group executive vice president for client services, says the exchange plans its own launch of an index of technology, media and telecommunications companies – which it wants to market on a global basis – in the first quarter of next year.

Despite its rival’s momentum, the Nasdaq is hardly about to roll over and play dead.

“Ninety-nine percent of our companies have stayed with us, and that’s one of the highest loyalty factors anywhere in the world,” points out David Weild, Nasdaq executive vice president for corporate clients.

“Now we are getting ourselves organized to go after the New York,” says Mr. Weild, who recently went to Texas to court Big Board companies.

“They have a lot to worry about.”

Nasdaq is readying, among other things, a new electronic auction system that will make its debut today by trading mostly stocks listed on the Big Board. Still, it is the Nasdaq that finds itself more on the defensive at the moment.

“Before the bubble burst, companies weren’t paying attention [to the advantages of an NYSE listing],” says Michael LaBranche, who heads LaBranche & Co., one of the Big Board’s largest specialist firms.

“Now they understand that we add value that doesn’t exist in other venues.”

For Mr. LaBranche, that shift has brought new business. In the last year, his firm has picked up the specialist business of four erstwhile Nasdaq companies, including Oxford Health Plans and BMC Software Inc. (BMC).