Stacey Cunningham, President of the New York Stock Exchange

CHRISTIANE AMANPOUR: And now, slightly our tongue in our cheek, we go from Richie Cunningham to Stacey Cunningham, who has well and truly smashed the glass ceiling over Wall Street. Stepping on to the trading floor as an intern in the ’90s, she has now taken the helm of the New York Stock Exchange, becoming the first female president in the organization’s 200-year plus history. She told our Hari Sreenivasan why she thinks Wall Street has a PR issue.

HARI SREENIVASAN: So you have been the president for a year now, what have you learned?

STACEY CUNNINGHAM, PRESIDENT, NEW YORK STOCK EXCHANGE: You know, I’ve learned so much more about our mission because I always came from the trading side of the business. So when I look back, I spent my time growing up on the trading floor and I understood the markets and I’ve always been a market enthusiast. But now in this role, I spend a lot more time with our listed companies and they’re out changing the world in such a variety of different ways, it really puts into perspective what the mission of the New York Stock Exchange is. And that’s to help companies raise money so they can go out and change the world and that’s been the most fun over the past year.

SREENIVASAN: You said you grew up on the floor. I mean, at the time when you started, what was it, as an intern or as a runner, there probably weren’t that many women on that floor. I mean it’s a totally different type of culture. How did you —

CUNNINGHAM: I was definitely outnumbered. But you know, I think when you are somebody what stands out in a crowd, it can cut both ways, right? There are pros and cons to that. And for me, in my own personal experience, it was fortunate because I had a much higher profile as a woman on the floor. So when I walked around, people knew who I was. And I think there were a number of people that took me under their wing pretty early in my time on the floor and helped me learn the business pretty quickly. And so for me, it worked out pretty well and I think I had a higher profile than some of my male counterparts.

SREENIVASAN: We have kind of a global audience today. If they’re not familiar with what the value of a stock exchange is, why are they around today the way that they are?

CUNNINGHAM: Yes. It’s funny because if you ask anyone on the street, they could tell you that they know what the New York Stock Exchange is. Around the world, they can tell you what the New York Stock Exchange is. Many of those same people can’t actually tell you what we do, right. And so if you think about the role that the exchange plays is it helps to pair up companies that are looking to grow their businesses and raise some money with investors who have money that they want to share in their success. And it was our founding fathers that said, hey, we want to have this financial framework that’s going to allow people to grow their businesses. And the benefit that comes from that is there’s job creation. As companies are raising money and they’re growing, they’re creating jobs, 45 million people are employed by the companies that are listed on the New York Stock Exchange. That’s a lot of jobs, right. There’s also the benefit of making their services and products available to the masses and not just the few with means. So it really allows them to scale the overall business so that everyone has access to it and at a more cost-effective level. And then three, and importantly, it allows investors to be able to share in their success. So dreamers and entrepreneurs can say, hey, I know this company and I like what they’re doing, and I want to put my money alongside them. And then as they grow, they get that benefit back. That’s why it’s so important for companies to go public. Because if they stay in the private markets, then the everyday investor doesn’t get to share and doesn’t get to dream alongside them.

SREENIVASAN: How much of it is everyday investors versus — I think there’s a sort of perception gap. I mean, half the country has some sort of stock in their 401(k) or some sort of their future tied into what’s happening in the stock market which also means there’s a big chunk of people that don’t. But why should people be paying attention to what’s happening at the stock exchange?

CUNNINGHAM: I think a lot of people have the perception that the stock market is about the wealthy and is designed for the wealthy and it doesn’t impact them. And the reason why I think they’re mistaken is very often they do have a 401(k) and they have investments in the stock market or they have an individual investment that they’ve made. But you can start at either they have an individual investment, they have an investment in their 401(k), they’re employed by a company that’s a publicly traded company, or they are indirectly employed by a publicly traded company. And all of those things mean that it is about them and it is about their growth and their opportunities. And so I think it’s really important that when we think about the changes we want to make in the stock market, we’re thinking about who are we here to serve and we’re here to serve investors and the companies that are looking to raise money.

SREENIVASAN: Are more of the transactions now done by kind of what I would consider the big fish, the banks, and the people that are representing the retail investor or actual people, you know, well, it used to be called your broker but clicking at their terminals and saying, I want to buy 25 shares of this?

CUNNINGHAM: Technology has, without a doubt, reformed — changed the industry the way it’s changed many other industries. And so even those brokers that are representing the end investors are not only using technology in a different way, they’re using wrappers in a different way. So for example, exchange-traded funds are an area of growth where they give investors access to types of investments they would typically not have played in, right. Whether they’re currencies or different fixed income or different products that they may not have known so well if they — the ETS put them in a structure that they are familiar with, that trades more like stocks. And so that’s something where you see end investors are still getting access to opportunities through a variety of ways, whether it’s mutual funds or ETFs or their brokers or their professional market makers as well. So you’re right, the ecosystem has changed a little bit but, at the end of the day, we’re still here to serve investors.

SREENIVASAN: Public market in its nature sort of prides itself on transparency. Have you been watching what’s been happening in the blockchain space and in cryptocurrencies? And is there some future where we are trading across these public ledgers with maybe fewer intermediaries?

CUNNINGHAM: I think when you look at new technologies that come to market, it’s important to think about, first, what are the problems that we need to solve and are there new technologies out there that can help us solve them and not the reverse. You don’t want to look at a technology and say, hey, how can I use this if you don’t actually have a need to use that? You mentioned blockchain. Blockchain wouldn’t, in today’s day and age and its level of evolution, be able to process the amount of data that we process in the U.S. equity markets. So I don’t look at that as an immediate solution for a problem that we actually don’t have.We process 80 billion messages in a day. That’s pretty significant and that’s part of why you’ve seen that evolution and technology be implemented into the market. People can’t process 80 billion messages but neither can blockchain. So that’s something that, you know, you want to first focus on what are we trying to achieve? Are there ways that we can strengthen the market? And is there technology out there that can help us do that and not the reverse? Doesn’t mean that there’s not a place for those things in certain aspects of our businesses.

SREENIVASAN: Recently, there was a big splash with Spotify doing a direct listing, going directly to the public without underwriters and so forth. And I think Slack has also filed similarly, paperwork for — to do that. Is that something that’s going to become more common?

CUNNINGHAM: That’s really an interesting phenomenon. So when Spotify decided to become a public company last year, they saw the value that the public markets provide. So if you think about what do you get from a public listing, there are a lot of benefits. One is you can raise money and there are — we have the deepest markets for raising money. Two, it helps raise the awareness and brand and visibility of your company, which helps you attract more investors and more customers. So if you’re looking to grow your business with some of the public companies that we hear from want the good housekeeping stamp of approval of being public. Third, it provides a depth of liquidity, you know. So you want a lot of access to buyers and sellers. It’s like jumping into a swimming pool where there’s plenty to go around and so you don’t get that in the private markets quite the same way. And then fourth, it also provides a way — by having a stock, you can engage in M&A and so you can buy other companies and use your stock as a currency to be able to do those things. So Spotify didn’t need to raise money, and they didn’t need the brand visibility. They didn’t need those first two things but they were interested in having an opportunity for their employees and early investors to be able to trade the stock and to be able to use the stock to potentially merge or partner with other companies.

So, because they didn’t need those first two things, they thought, hey, I’m going to take a different path and we’re not going to go with the traditional IPO. They just wanted to start trading as a public company one day. So we worked on that for a year and a half with them. And now, as you mentioned, Slack is following in their footsteps. It’s interesting for companies to say, what do I actually need to achieve and do I need to use the traditional solutions or can I try something new? I don’t think it becomes the norm, because some of those companies do want the first two items and they are more interested in having the traditional roadshow with banks that help them through that process. So, I don’t think it’s going to replace the norm but I certainly do think we’ll see other companies trying that out.

SREENIVASAN: There’s also been concern over the past few years about what most people don’t recognize, dark pools. This idea that there’s actually a huge chunk of trading that’s going on, not on the New York Stock Exchange or not in NASDAQ, not some place where you can track it publicly but buyers and sellers are kind of quietly meeting somewhere else. And consumers like us don’t really have any visibility into what type of transaction’s happening back there. How do we figure out how to work with that?

CUNNINGHAM: Yes, I think you’re right. A lot of people don’t realize how the markets have changed. So traditionally, stocks mostly traded wherever they were listed and now they can trade across a number of different exchanges and dark pools. Roughly, 40 percent of the market is trading in those dark pools that you reference or not on public exchanges. And when I say public exchanges, we’re showing our prices out to the world. So when you go log into your online brokerage account and you want to see what the value is of a stock, you’re seeing the highest price bid and the lowest offer and, like, what’s that quote in that stock. That’s being set by the exchanges. Then those other venues are taking those prices to match trades themselves elsewhere so they’re not actually contributing to determining what the value is of a security. So it’s important that we balance the benefits of having both on exchange and off-exchange trading. And there are benefits to having off-exchange trading. When you’re a very large investor, you don’t want to move the market too much by saying that you’re going to be a buyer of a large size. So that gives them some anonymity where they can sort of get things done over a period of time without moving the market too much. So — but there’s a balance, right? And I think at 40 percent, we start to worry about the integrity of the public prices and making sure that it is really reflective of supply and demand because that’s critical. So we spend a lot of time in D.C. with the SEC and others making sure that it’s understood how important it is that that public price does reflect what’s best for investors.

SREENIVASAN: And it seems like that’s one of those things where investors are going to say, you know what, this is all stuff that’s happening in the high rollers room in Vegas, I’m never really going to see that. And maybe someone comes out and flashes their million-dollar chip but I don’t know whether I’m going to get the best price based on what these big shots did overnight.

CUNNINGHAM: Yes. I think without getting too far into the weeds, many of those investors are trading in the dark pools themselves, even if they don’t know it, right. So their broker is trading in those places. I think what — where I get concerned and frankly, we’ve been very vocal around some of the policy decisions that are being made by the SEC will actually skew even more to the dark. And in February, we announced that we’re suing them because of some of the changes that they’re proposing that we think will lead to worse prices for investors at the end of the day but a better experience for dark pools versus exchanges. And we want to make sure that we’re not continuing the trend of putting more benefits to trading in the dark versus in the light. You’re taking more risk when you’re showing the world what you’re doing and raising your hand and saying, hey, here are my prices. You’re taking some risk for that. And so we want to make sure that people still have the right incentives to do that.

SREENIVASAN: How do we increase access, only about one percent of all the companies in the world are actually on the exchanges. Sometimes you’re limited by which exchange they’re on or sometimes you’re limited by, let’s say, what access your broker has to those shares and stocks and so forth. But how do we encourage more people to be in this public sphere?

CUNNINGHAM: I think it’s balancing between the benefits of being a public company and the additional obligations. So the reason why we have obligations on public companies is to make sure that investors are protected, right. And that there’s a — when they’re listed on an exchange, there’s a certain level of standards that they’ve met and that’s part of what our listing grants them is that, yes, you’ve complied with these rules. But they also, then, get the benefit of the liquidity of the public markets and all of the benefits that they get there and the discipline and governance that comes from being a public company. So there’s a lot of good that comes from being public. But if you continue to add on to those obligations, whether they’re regulations that they need to meet or in more recently, we’re getting a lot of requests for them to meet certain standards around environmental issues or social issues, and that’s where we get concerned that if we build the number of restrictions on public companies, companies will just stay private.

SREENIVASAN: You know, because interestingly, this sort of information marketplace, we’re seeing social platforms and others start to make decisions on what type of speech do they want to regulate, what kind of companies should I host, right? So if you’re a site that’s spewing horrible, venomous stuff, now there are credit card processing companies, there are social networks that are just saying you’re not going to be on our system. The New York Stock Exchange is not Facebook but you are a platform for these places. Is there a threshold where you say, this is not a company that we want to be listing?

CUNNINGHAM: I think what’s really important and I think it’s appropriate for those companies to make decisions based on their own stakeholders of what companies they might want to do business with or how they want to approach their customer base and what they want to allow, entirely appropriate. For me, our mission is to make sure investors have access to the most options, so we’re not going to say those companies can’t be public. If they comply with the laws and they comply with our listing standards, they’ll be listed.

SREENIVASAN: Because if they’re so horrible, basically the markets will speak.

CUNNINGHAM: Market forces should determine, right. People should put their money in with the businesses they want to support and that they stand behind.

SREENIVASAN: There was a recent poll about millennials in investing, now slightly more than a third of them under 35 are not investing in the stock markets. Does that pose any sort of a long-term challenge for you?

CUNNINGHAM: Yes. I think there’s a little bit of a PR issue for the stock market. I think people feel like the financial markets in general, you know, are not about helping people. And so I think that’s something that I think is important for us to make sure people recognize the value that they can get and the value that they serve to society. And that’s a good — it’s a good thing. I do think we see a lot of younger people leveraging new investment tools like ETFs, right. They’re certainly active in the ETF space or they have access to things they may not have access to before. So, I’m not overly concerned but I think it’s something that we need to make sure we’re prioritizing. What is the story of the financial markets and how do they serve the public in a helpful and productive way and not just, you know, about the wealthy?

SREENIVASAN: Best case scenario, 10 years out, 15 years out, what do stock markets in the world look like?

CUNNINGHAM: I think our underlying mission is the same. Helping investors plan for the futures. Helping companies raise money. We do that in different ways than we did 10 years ago or 20 years ago, and I think that will continue to evolve but I think the mission stays the same.

SREENIVASAN: All right. Stacey Cunningham, thank you so much.

CUNNINGHAM: Thank you.