For organizations that should operate in a mundane, quasi-government world, stock exchanges sure make alot of noise and get alot of attention these days.  We are constantly hearing about how they want to merge their ultra-competitive, extremely low margin businesses together.  And this week we heard two more interesting exchange stories:

 1) BATS Global Markets, has decided that it will launch a market for primary listings this year.  Now, before we comment on their proposal, we would just like to say hello to Joe and Randy, two of our keenest Themis Thoughts readers.  Most of you are probably thinking, “isn’t that what a stock exchange is supposed to do anyway – list stocks on their exchange”.  In years past, you would have been correct.  But the market has changed and the amount of IPO’s has slowed to a trickle.  Exchanges have changed and now focus much more on transactions and market data revenue.  We saw this quote yesterday in the FT from the BATS president: “We believe there is a need for an alternative listing venue in today’s market.”

 We couldn’t agree more.  The time is right now for an alternative exchange to create a model which gives corporate issuers a choice of how their stock is traded.  The time is also right for an exchange to go back to their roots and perform functions that an exchange should be performing like helping small and mid-sized companies raise capital so that they can grow.  We sincerely hopes that BATS incorporates this type of model into their new listing business. We have plenty of more ideas on this so feel free to give us a call if you want to chat.

 2) Bloomberg news found out the National Security Agency has joined the investigation of last years cyber attack on NASDAQ.  The Bloomberg article had this to say:

 “By bringing in the NSA, that means they think they’re either dealing with a state-sponsored attack or it’s an extraordinarily capable criminal organization, said Joel Brenner, former head of U.S. counterintelligence…Brenner said intruders might do just as much damage by manipulating trading to create doubt about the validity of trades. More than 93 billion shares were traded on the Nasdaq exchange in the fourth quarter of 2010, equal to almost 20 percent of the U.S. equities market, according to the company’s final quarterly report to the Securities and Exchange Commission last year.”

 Obviously, this sounds like a much more serious situation now than when first reported as just a breach on one of NASDAQ’s products.  Now, it sounds more like one of those Mission Impossible movies.  But we do have one question?  Who is paying for this government investigation?  The NSA is going to ring up a huge bill trying to get to the bottom of this.  But are the taxpayers on the hook for the services given to a public corporation?  Remember, NASDAQ is not a government agency or even a quasi-government agency.  They are a for-profit, public corporation whose executives have been raking in tons of cash over the years. They operate in an ultra-competitive business with the goal of increasing their shareholders wealth.  So, shouldn’t they have to foot the bill for the NSA investigation?