President of NYSE Group and Chair of ICE Fixed Income & Data Services, Intercontinental Exchange Inc
NYSE's Martin Questions Some Rules Used to Attract SpaceX to Nasdaq
NYSE President Lynn Martin says some of the rules used to attract SpaceX to go public on the Nasdaq are "questionable." She says "market integrity" is not a "competitive dynamic." Martin says it's been a good year for IPOs across all industries and they're working to bring more companies public. She speaks on "Bloomberg Surveillance."
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About Lynn Martin
Lynn Martin, President of the NYSE Group, discussed the role of public markets in funding AI and other technological revolutions, stating that "the public markets are the only markets to generate the type of capital for the medium to long term on a consistent basis that is required for every revolution." She added that a healthy public market requires a healthy private market, as private incubation stages feed into public offerings. Martin also commented on the Trump administration's investment accounts for young people, saying they are "great from two perspectives," promoting financial literacy and creating a generation with "a stake in America." Martin questioned rule changes made by the Nasdaq to attract a listing from SpaceX, saying that "market integrity is not something that is a competitive dynamic" and that some of the rules are "questionable." She emphasized that protecting investors, particularly retail investors, is the NYSE's priority. Martin noted that the NYSE has seen a strong year for IPOs across multiple sectors, including industrials, energy, and consumer names, and that the exchange has "no intention of leaving New York City."
Transcript (25 segments)
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Interviewer0:00
Talk about all the success of your institution in just a moment, but one particular name that jumps out, SpaceX, and it's gonna be on the Nasdaq. And they changed a couple of rules to maybe encourage them to go over there and not over here. What did you make of those rule changes?
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Lynn Martin0:14
Well, from our perspective, market integrity is not something that is a competitive dynamic, and some of the rules that have been changed to woo some of the large companies you referenced, SpaceX, are questionable. And from our perspective, what is most important to us is protecting investors, particularly the mom and pops in the market. And when you think about the ETFs that they invest in and the rules that have been changed, it's a question mark.
I
Interviewer0:46
Let's talk about the so-called seasoning period. So for the S&P 500 to enter that, I believe the seasoning period's about twelve months. For the Nasdaq 100, for these particular names, it'll be fifteen days. What kind of complications does that introduce for individual investors?
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Lynn Martin0:59
So I actually think that the fast-track aspect does merit a discussion. And I know S&P, for example, has a consultation out to the market today whether it should be twelve months or it should be six months. I don't know what the right number is there. I know that the index providers, particularly those that don't have conflicts of interest, are gonna figure it out to the benefit of retail investors, allowing companies to be included in the flagship indices like the S&P 500 in a quicker form. So I think that is actually a good discussion to have. Rushing that type of rule change out, though, in order to accommodate a listing, is a question mark. I think the bigger thing, which you've heavily covered on Bloomberg, is the float multiplier that should be looked at more closely. And I guess we'll figure out what happens in the next couple of weeks.
I
Interviewer2:02
Can I follow-up on that? So let's talk about it. I'll be talking about some of these names, and I'll say they've got a market cap of, like, 2 trillion, whatever the number might be. The actual float, just how low is the actual float going to be?
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Lynn Martin2:12
I mean, I think the S-1 is really what you should look at for the percentage of that will actually be floated. But what I'm referring to is the three times multiplier that Nasdaq in particular has put on SpaceX.
I
Interviewer2:29
Just to give some context, people are worried that some of the new IPOs are gonna have a disproportionate impact in weighting in some of the indexes. How much do you see that as a potential liability, especially without a longer seasoning period to really protect retail investors?
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Lynn Martin2:44
Yeah. I mean, it comes back to what I was saying earlier. It's about market integrity and the protection of retail investors. To be honest, I just don't know what effect this is going to have on the market, and it's something that economists have covered heavily. Economists, you know, independently have covered heavily. So it'll be interesting to watch.
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Interviewer3:07
In the meantime, this is a real sea change when it comes to market dynamics because we've talked about the shrinking IPO market and how the shrinking public equity space has really strained a lot of people's expectations of exactly how capital markets should progress. How much do you welcome all of the IPOs this year versus get a little bit concerned that it could overflow a market that hasn't been used to this type of supply?
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Lynn Martin3:30
You know, it's been a good year so far for IPOs. I know that the big three that you flashed earlier are the ones that are getting a tremendous amount of attention, but there have been a great amount of IPOs coming to market already across all industries. And we're working with a variety of other companies to bring them public too. I think that actually speaks to the diversification that is coming to market across all industry. You've got the energy markets. You've got the consumer names coming to market. Industrials are very much having a moment. So it's across multiple sectors. And I think that's actually welcomed by retail investors. They don't just want to invest in Elon Musk, despite the fact that he is, you know, one of the great innovators in history. They want to invest, they wanna have a balanced portfolio.
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Interviewer4:23
You just got to spend some time with Elon Musk and the president. I was just with him in China.
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Lynn Martin4:27
Yeah. I was on that trip as well. Can you pull back the curtain for us and tell us what Chinese officials actually told American businesses?
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Interviewer4:34
Yeah. I mean, the message that America was really delivering on that trip, I think it was the first time in history that an administration had ever brought 20 of the leading CEOs cross-sector of the market to a state visit. The message that we were delivering was that business could really be transformative in transcending geopolitical barriers and could play an incredibly important role and does play an incredibly important role in the geopolitical dynamic.
How do you see this relationship developing? Do you see Chinese companies at one point being able, more of them, coming on to American stock exchanges?
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Lynn Martin5:15
It really depends on the governance. One of the things that we're focused on is how our markets continue to be transformed over the long term, but we would never sacrifice the transparency that the US stock exchanges in particular require.
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Interviewer5:38
Can we finish on integrity? Because it's something we've talked about repeatedly on this program. It's been a sense, particularly with this war in the last two months or so, that people might have information ahead of time. I'm sure you're having those conversations as well. I worry that if people start to believe someone's got an edge that they don't have, that they're trading on information that nobody else has before it becomes public, the people would disengage, and it will affect liquidity. These are the kind of things I'm sure you worry about too. How important is it to get to the bottom of what's been taking place in just the last two months alone?
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Lynn Martin6:08
I mean, one of the things that is very much focused on and continues to be focused on is anyone with inside information and market integrity. And I think our regulators do an excellent job at surveilling those markets to ensure that people don't have information ahead of the general public.
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Interviewer6:30
Are there conversations happening now to get to the bottom of some of the price action through March into April?
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Lynn Martin6:36
I mean, I think the regulators are continuing to increase the amount of tools that they have at their disposal. I think, actually, AI is going to present an amazing opportunity.
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Interviewer6:47
In what way?
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Lynn Martin6:48
It will present opportunity for regulators to surveil markets at a much greater speed. It's something actually one of our first use cases has been deploying AI to surveil our markets given the increasing messaging that we have at our matching engines.
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Interviewer7:07
Because you and I both love capitalism. We got a bias. Absolutely. Love capitalism and free markets, and I just wonder that people losing faith a bit so far this year.
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Lynn Martin7:17
I don't think they're losing faith. I'm the eternal optimist, though. I'm the person that's gonna see the glass as half full, and that's why it was such an honor to represent the US last week in China to talk about the role of American markets. We just turned 234 years old this past weekend. We have survived multiple pandemics, wars, financial crisis, you name it. And every time our markets have become stronger, more transparent, more liquid, and that's because of the development of technology, technology tools that enable price discovery to happen in the most efficient fashion possible, and enable our regulators to surveil those markets and continue to build that trust.
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Interviewer8:06
Are you concerned that if there is some sort of deflation of the enthusiasm around AI that that could undermine people's confidence in markets akin to what happened in the aftermath of 2008?
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Lynn Martin8:17
I think there has been a bit of a broadening out of the aperture of what is happening in the world today. So if you look at coming back to your question on IPOs, some of the IPOs that have come to market are industrials, they're energy, they're infrastructure plays that aren't just focused on AI. Our grid needs modernization, and I think there's an acknowledgment in the administration that our grid has needed modernization for some time. So you actually look at great industrial companies, great energy companies coming to market that are going to benefit and are going to really drive that industrial revolution, the next phase of it, lending it AI or anything that's required in the grid.