By Ros Krasny
NEW YORK (Reuters) - The pending demutualization of its parent will not shift the Boston Equities Exchange's (BeX) focus from being a "utility" among stock exchanges, its president, Tom Richardson, said on Tuesday.
"The mantra is to become an industry utility and that's absolutely in the best interest of the brokers," Richardson told the Reuters Exchanges and Trading Summit in New York, speaking by telephone from Boston.
In recent years, broker-dealer net trading revenues have fallen while pretax profits of publicly-traded stock exchanges such as the NYSE Group Inc. (NYX.N: Quote, Profile, Research, Stock Buzz) and Nasdaq Stock Market (NDAQ.O: Quote, Profile, Research, Stock Buzz) have skyrocketed, helped by significant pricing power.
Ventures like the fully-automated BeX aim to shift the balance, with something closer to the model that existed in the days before public listings and shareholders.
BeX's parent, the Boston Stock Exchange, announced in February that it would convert to a for-profit entity from a member-owned exchange in 2007. Richardson said Boston is "in the seventh or eighth inning" of the demutualization.
"We basically need to go through the last stage of the approval process and the proxy process," he said, adding that the investor group at BeX is "supportive" of the demutualization.
Five major securities firms -- Citigroup (C.N: Quote, Profile, Research, Stock Buzz), Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz), Fidelity Investments, Lehman Brothers Holdings Inc. LEH.N and Merrill Lynch & Co. Inc. MER.N -- formed BeX, which billed itself as "the platform for executing equities in a Reg NMS world" when it was launched in December.
The BeX system allows eligible orders in some securities to electronically match and execute against one another.
The U.S. Securities and Exchange's Commission's Regulation NMS is a series of initiatives designed to modernize the market system for equities.
"Without NMS I doubt that the brokers would have invested in these platforms," said Richardson, who spent 12 years in institutional equity trading at Citigroup before joining BeX in November.
And while consolidation looks inevitable within the U.S. and global securities industry over the next few years, Richardson said Boston could emerge as one of the victors.
"I like where we sit. We have the blue-chip platform for what will be the ultimate exchange 18 months from now," he said.
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