Sell Out – Parking Meters and Exchanges
Sell Out. The term can have a few different meanings. Lets take a look at two different types. First, there is the sell out in the business sense. You can sell out your business if you want to move on to other things or if you need to raise some cash. The city of Chicago decided to sell out their future parking meter revenue to the highest bidder back in 2008. That bidder happened to be a investor group led by Morgan Stanley. The group paid $1.15 billion for the right to collect the revenue on the Chicago’s 36,000 parking meters for the next 75 years. Facing budget problems, Chicago decided to sell out rather than make some tough budget cuts. But the story gets much better. The investor group that purchased the meters has the right to raise rates amongst other privileges. According to Bloomberg “Morgan Stanley’s partnership raised parking rates twice since the lease began, and more are planned. Fees at some central business district meters rose to $4.25 an hour from $3 since January 2009 and will go to $6.25 in 2013. In midtown Manhattan, hourly rates are as much as $2.50.” Not only did they raise hourly rates, “Chicago Parking Meters plans to increase revenue by fitting more cars into spaces by eliminating marking lines, raising the number of metered slots and adding to the hours requiring fees”. And, sorry people of Chicago, no more free parking on Sunday or holidays . And here is the best part of the story, after setting up its investor partnership to buy the parking meters, Morgan Stanley sold a 49.9% interest in the partnership to a group which is half owned by the Abu Dhabi Investment Authority. So, Chicago sold out their parking meter revenues to a group now partially owned by a foreign government.
The second type of sell out is best described by Wikipedia: “Selling out” refers to the perception that someone is compromising their integrity, morality, or principles in exchange for money or “success”. A good example of this sell out are our stock exchanges. Once thought of as a quasi-utility with investor protection and capital raising as their goals, exchanges are now cut-throat, competitive profit centers who chase the almighty bottom line like any other corporation. They are in an extremely low margin business where one or two large customers could make or break their quarterly statements. But as astute readers of Themis Thoughts, you already knew this. But what you may not have known is that some of these exchanges that hide behind the “competition is good for everyone” banner may now looking to block competitors that threaten their business. According to the FT:
“Verizon, the US telecommunications group, has been reported to Sweden’s competition authority over allegations that it has barred a rival of Nasdaq OMX, the New York-based exchange operator, from its network infrastructure. Burgundy, a Stockholm-based trading platform owned by several of the biggest Nordic financial institutions and which competes with Nasdaq OMXs Nordic stock exchanges, said Verizon was choosing sides in the trading industry by allowing Nasdaq OMX exclusive access to a data centre in Sweden.” http://www.ft.com/cms/s/0/f375775a-06d7-11e0-8c29-00144feabdc0.html#axzz1899Jspk7
After selling out there investor protection and capital raising roles, are the exchanges now looking to block competitors and sell out their free market policy?