An interview with Tom Farley, President, New York Stock Exchange –
When one thinks of leading tech firms, usually the likes of Apple, IBM, Uber, Tesla come to mind. In what ways can the NYSE be considered a technical innovator?
The NYSE has evolved into a tech-oriented financial services firm. We are building the next generation of trading technology designed to enhance consistency, performance and resiliency while also reducing complexity. We are developing a state-of-art surveillance program for our exchanges, which includes a customized technology platform for effective monitoring. And we’re investing in the technology our listed companies use to interact with us. But our evolution is about more than enhancing our technological capabilities. When NYSE’s parent company, Intercontinental Exchange, went public on the NYSE in 2005, it was a five-year-old start-up with roots in engineering and trading technology. Since acquiring the NYSE in 2013, ICE has brought that start-up spirit to a very established organization. For NYSE to continue to be the leading exchange for technology Initial Public Offerings (IPOs), a position we have held since 2012, we must continue to innovate on behalf of our customers.
The speed of technological innovation seems to demand leadership that is agile and responsive. How do you cultivate creative flexibility at NYSE?
I encourage and empower my colleagues to always think about what’s next for our customers. For example, earlier this year, we made a minority investment in Coinbase, a leading bitcoin wallet, and launched the first exchange-calculated and disseminated bitcoin index, NYXBT. This was done in anticipation of the potential growth of bitcoin and blockchain technologies, with bitcoin values quickly becoming a data point our customers want to follow. We’re willing to take on some risk earlier in the lifecycle of a new technology or asset class if we anticipate growth. Nimble, agile and early-mover are not words traditionally associated with a company that has been around for 223 years, but they are very much ingrained in our culture today.
How does the exchange balance risk and innovation?
When it comes to innovating on behalf of our customers, our view is that failure can be constructive, as long as we learn from it. We recently announced we would be introducing a midday auction for less active securities, building on the success of our opening and closing auctions. The open and close at the NYSE are significant volume events that provide price discovery and block facilitation. Does that mean the midday auction will be an automatic success? No, but there is a liquidity crisis in a very large proportion of US listed stocks, largely due to the excessive fragmentation that exists in the market, and as the leading exchange, we are willing to take a risk to address it on behalf of our listed companies. The aim of our midday auction is to provide another opportunity to aggregate trading interest in lower volume securities, enabling our listed companies to continue to attract investors.
What are some unique challenges in leading a storied institution through a marketplace of constant innovation and disruption?
All companies have their unique set of challenges—it is the way they respond that sets the leaders apart. Our approach comes back to the core principles of listening to our customers, which is why we chose very early on to play a leading role in the debate about the structure of the US equities market. ICE Chairman and CEO Jeff Sprecher and I met with trading firms and listed companies and the resounding feedback we got was that the market was too complex. We have since advocated for improvements on their behalf as well as made unilateral changes so that in today’s highly complex market, we are able to offer our customers simplicity and transparency. As the leading exchange globally for capital raisings—capital which is used by companies to create new jobs, drive innovation and fuel growth—the NYSE represents the confidence global companies have in the US capital markets. We take that responsibility seriously.
How has your time at NYSE impacted you as a leader?
Before two years ago, my career had focused on the derivatives market, not stocks or listings, and now I am responsible for leading the largest and most visible stock trading and listing venue in the world. I learned quickly that to lead effectively I would need to assemble an extraordinary management team, empower them to lead and then trust them to work their magic. Fast forward to today and I have a talented and diverse team with a kaleidoscope of experiences and viewpoints. I am now a more effective leader because, perhaps out of necessity born of my own relative recent immersion into equities, I was required to trust the experts around me.