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Tuesday, October 07, 2008
Buy Order
One Fund Manager Aims to Cash In on Nasdaq
Lauren Covello
FOXBusiness
At a time when the market’s day-to-day performance seems more unpredictable than ever, one thing can be certain -- people are trading. And one thing that's a pretty good bet is that people will be trading even more in the future.
For Andy Bischel, manager of the AHA Socially Responsible Equity Fund (AHSRX), that’s just one reason why global exchange company Nasdaq OMX Group Inc. (NDAQ) is a good buy right now.
Bischel believes Nasdaq OMX, which owns and operates the Nasdaq Stock Market as well as several stock exchanges across Europe, is “well-poised” to thrive amid the turmoil on Wall Street, arguing that, whether they’re buying or selling, investors are under the gun to get their money moving.
“There’s an inherent generation of trading activity that goes on in all kinds of [market] environments,” he said.
Though Nasdaq OMX is down 38% year-to-date through the end of September, Bischel sees growth potential in the company’s worldwide presence, increasing number of securities and improving fee structure.
“There’s great value here,” he said.
Recent actions have solidified the New York-based company’s position in the global market. This past February, Nasdaq completed its purchase of Swedish exchange OMX and now boasts over 3,900 listings in six continents -- the most worldwide listings of any major market.
At the end of September, the combined Nasdaq OMX became the first global exchange to roll out pricing based on global transaction volume as well as new listing services to make it easier and more efficient for companies to list on multiple markets.
Still, it’s future potential that Bischel believes makes Nasdaq OMX an attractive buy. According to Bischel, the contraction of the shadow banking system and the realities of counterparty risk will eventually necessitate the establishment of a “national clearinghouse mechanism” which will benefit the company. Bischel sees opportunity in the “proliferation of exchange-traded investment vehicles,” and says that the standardization of those contracts will increase the flow of securities for Nasdaq OMX.
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It's time to let you in on a dirty little secret: You may not own the stock you own. That's right, if you invest with a brokerage firm, the shares you bought are almost certainly not held in your name. Technically, they're held in the name of the Wall Street firm you do business with, hence the term "street name."
No, you haven't been robbed. Ultimately, the decision to hold shares on the books under a different name doesn't affect the economic ramifications for you. You¿re listed as the "beneficial owner," even though the firm is the official owner of the shares. But, you are giving up some rights, and investors concerned about good corporate governance might want to get that stock back in their own names.
Here's the problem: If your stock is technically owned by, say, Merrill Lynch, then Merrill Lynch gets to do things with it that might work against your wishes. Take short selling. Investors who want to sell shares short need to first borrow those shares. The lenders are often the big Wall Street firms that are handing out Street-name shares. So, if you feel that a company you own is a victim of aggressive short selling, chances are your own shares are being used to fuel the shorting.
Also, your brokerage firm can cast ballots on some corporate matters affecting a company without getting your input. Technically, this can only happen in votes considered ¿routine¿ by securities regulators. But, there's a big catch: some big events, like board elections, are considered "routine" under law.
The good news is that you can easily fix the Street name problem: Just request that your brokerage firm makes you the listed owner of the shares. If they refuse, find a new firm.
