Catching Up with NYSE President Stacey Cunningham at the End of an Extraordinary Week on Wall Street

45 minutes · March 28, 2020

With markets cresting following three consecutive days of gains, NYSE President Stacey Cunningham sat down for a virtual fireside chat with Marie-Josée Kravis and members of the Economic Club of New York. With the Trading Floor temporarily closed, they discussed how, even in a fully electronic environment, the New York Stock Exchange market model helps public companies, traders, and investors navigate through uncertain times. The discussion also covered Stacey’s thesis for why, even in turbulent times, markets must remain open.

Speaker 1 (00:03):

From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs and harness the engine of capitalism, right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.

Josh King (00:46):

This won't come as a surprise to anybody. It is simply astonishing to watch from my perch anyway, how the world has changed in the course of just a few weeks. Long before I came to Intercontinental Exchange in the New York Stock Exchange over two years ago, I had occasion to visit the NYSE for a variety of really special events, an IPO my former company was holding, an anniversary bell ringing for another company. The ornate boardroom on the sixth floor really has evolved into a gathering spot for the global financial industry. It's regularly used by our listed companies for their investor days, product launches and board meetings.

Josh King (01:25):

One such event I remember was the Economic Club of New York. There was the then NYSE President, Tom Farley, interviewing a tech CEO about his company's plans and strategies in front of hundreds of leaders from the financial community. I think back on that day, these days, years before the concept of social distancing was on anybody's mind, the webcast or conference call has for the moment become the new normal. People are still hungry for information, but just not gathering in one place to get it, crowding around the coffee station.

Josh King (02:00):

I certainly hope we get back to that, but it hasn't deterred ICE or the NYSE from using all of its resources to share the latest perspectives with our customers, issuers and market participants. In just the past week, we've convened with former FDA commissioner Scott Gottlieb, Allianz's Chief Economic Advisor, Mohamed El-Erian, and the Centers for Disease Control, Dr. Nancy Messonnier and thousands among our community have benefited from their insights.

Josh King (02:28):

And that'll continue whether there's a coffee station or not. But for this episode, let's pivot to another example of the new normal to a remote event convened by our old friends at the Economic Club of New York. The club, this time, not at the NYSE is hosting a weekly conference call for its members throughout the COVID-19 crisis and invited NYSE President, Stacey Cunningham to join to discuss recent market events in live of the crisis. The fireside chat is moderated by Marie-Josée Kravis, a senior fellow and vice chair of the board of trustees at the Hudson Institute. She's also a well known economist and a member of the board of directors for several public companies, including Ford Motor Company, that's NYSE ticker symbol F. And she's also the wife of the chairman of another listed company, Kohlberg Kravis Robert, that's NYSE ticker symbol KKR.

Josh King (03:22):

The discussion you're about to hear explores the impact of the pandemic on the global economy and how markets across all asset classes have been affected. The start of the conversation picks up where our last episode with our own NYSE Chief Operating Officer, Michael Blaugrund left off. Michael and I were talking last week about what to expect when the market opened on Monday, March 23rd, without the support for the first time in 228 years of the New York Stock Exchange trading floor as its anchor. In their talk, Stacey and Marie-Josée discuss the short term findings of trading dynamics without the human element and how even in a fully remote environment, New York Stock Exchange market model helps public companies, traders, and other investors navigate through uncertain times.

Josh King (04:11):

Stacey provides insight into how market structure protections like the market-wide circuit breaker have performed and her ongoing conversations with former Secretary of the Treasury, Nick Brady, the architect of the market-wide circuit breaker. If after you hear this conversation you're interested in learning more about the topic, Secretary Brady and former Undersecretary of the Treasury and current Harvard Professor, Robert Glauber have written and allowed us to post on nyse.com, a paper titled circuit breakers are doing their job, but don't close the markets

Josh King (04:46):

I encourage listeners to check that out, as well as the sources for a number of the market statistics that Stacey mentions throughout the conversation. Marie-Josée's conversation with Stacey Cunningham on her real time analysis of the impact of temporarily closing the trading floor and how the markets have weathered this environment and why the markets must remain open. That's all right after this.

Speaker 1 (05:11):

And now a word from Ron Delia, CEO of Amcor, NYSE ticker AMCR.

Ron Delia (05:20):

Today is a really big day at Amcor. We've been around for 160 years. After so much time, it takes the passion and dedication of our people around the world, and it takes resilience. And we have lots of that at Amcor. Well, our aspiration is to be the leading global faculty company, and that means winning for our customers, our people, our investors, and the environment. We have a big pledge around to sustainability. We really hope to change the world as we look forward. Amcor now listed on the New York Stock Exchange.

Marie-Josée Kravis (05:47):

So good afternoon everyone and welcome. I'm Marie-Josée Kravis the chairman of the Economic Club and a senior fellow at the Hudson Institute. The Economic Club of New York is one of the nations leading nonpartisan forums for discussions on economic, social, and political issues. And we feel we have a special responsibility in the context of what's happening in markets generally. And we've all been watching the markets, especially over the past few weeks. And today we bring you our very special guest and club member, Stacey Cunningham. Stacey has been a great supporter of the Economic Club, and I want to thank her for her steadfast support, but also for taking the time today, while the markets are open to meet with us.

Marie-Josée Kravis (06:33):

Stacey is the president of the New York Stock Exchange Group, which includes the New York Stock Exchange and the diverse range of equity and equity options exchanges, all wholly own subsidiaries of Intercontinental Exchange. She is the 67th president and the first woman to lead the New York Stock Exchange Group in its 228 year history. So today's program will be a conversation I'm fortunate to be moderating. Questions that have been sent to the club from members have been shared with me, and I've tried to incorporate as many of them as possible. So Stacey if you're ready we'll begin.

Stacey Cunningham (07:11):

I am. Thank you so much Marie-Josée and thank you to Barbara and the club more broadly. Thanks for having me.

Marie-Josée Kravis (07:18):

I'd like to discuss with you, Stacey current market conditions, what you're seeing, what it means, but before we jump into the heart of the subject, maybe if you comment, this has been your first week on March 23rd, we saw the closing of the historic trading floor at the NYSE. You moved to all electronic trading, and I'm just wondering if you might tell us how it's working and how have the designated market makers or the brokers been operating now and has it at all affected their ability to participate fully in the markets?

Stacey Cunningham (07:51):

First before I even do that, I just want to start off by extending my deepest sympathies to all of those who've already been directly impacted by the rapid spread of COVID-19. And I'm sure many people on this call have contact or friends or family who are directly impacted. And so as we all do share that sympathy and also deepest gratitude for everyone who's fighting this pandemic on the front lines, especially our healthcare workers and certainly united we're confident we can battle it, but I just wanted start with that.

Stacey Cunningham (08:20):

So yes, we moved the New York Stock Exchange to fully electronic trading on Monday. While we operate five different equity markets and two options markets, only one of those equity markets has a combination of both people in technology and our options markets both have a combination of a trading floor as well as electronic trading. And so for those three markets that were combined out of the total eight, we moved to 100% electronic trading in that effort to help battle the pandemic that we're seeing and limit the number of people that we're bringing together.

Stacey Cunningham (08:52):

It's been very, very smooth. It's a smooth transition. It's not something that's new to us to operate electronic markets. We certainly do that and have done that for several years. You lose the benefit of the human judgment and the human value that's combined with technology. So we do feel strongly that the combination of people and technology is much more powerful than either one on its own. We certainly can run electronic markets, and that transition has been quite smooth. So you mentioned the market makers, without getting too deep into it.

Stacey Cunningham (09:24):

Every company that posted on a New York Stock Exchange has a designated market maker. That's a human being that's assigned to overseeing trading in their stock. And they do that every day from the trading floor. There are also a number of floor brokers on the floor each day, and they're representing customer orders. They're not trading for their own accounts, but they come onto the trading floor and represent their customers in that fashion. So while those people are using algorithms to trade each day, they can adjust those algorithms by applying human judgment. So the fact that we've closed the floor, doesn't eliminate all of that order flow that comes into the exchange, those market makers are still trading. Algorithmically they're just not doing it from 11 Wall Street, the 11 Wall Street trading floor. So they still participate and provide that value.

Marie-Josée Kravis (10:09):

So just to elaborate on that, just last year, in fact, I'd say was a fortuitous decision. The New York Stock Exchange undertook a major upgrade of its underlying platform. So I think your program is called Pillar. And that as you mentioned, powers all of your equity and options exchanges, I mean, that's something that you would've done with or without coronavirus. So talk to us a little bit about the technological challenges that occur in just your business activity, your[crosstalk 00:10:41]crisis?

Stacey Cunningham (10:42):

Yeah. I mean, I think we just need, it would be helpful maybe to take a step back and think about, the technology that we use at the exchange every day needs to be ready for whatever market conditions may come at any point in time. And so while we're here to talk about the markets and talk about seeing from market activity, it's really important to recognize that people are behind the markets. So markets are a reflection of public sentiment. So for very good reasons right now people have a high level of anxiety. And it's very traumatic for a person who's worried about their personal safety and health and that of their family and friends. And there's a lot of that happening right now.

Stacey Cunningham (11:18):

It's also traumatic for a person who's worried about their personal financial stability and the ability to provide for their families. And we're seeing a lot of that right now too. So as we battle this pandemic, there are so many people that are simultaneously worried about both of those things and that anxiety is being reflected in the market. It's well known facts that markets are much more volatile during periods of uncertainty. And this is an unprecedented period of uncertainty. We have so many questions we don't have answers to.

Stacey Cunningham (11:48):

We don't know yet when we're going to see the peak number of cases of COVID-19 as it continues to spread. We don't know what the short-term and long-term impacts, so the protective measures, we have already put in place. We don't know what their impact is going to be on the economy. We don't know what the impact of the stimulus packages we just developed will be. We don't know when people are going to return to work or when they're going to go back to normal activities, which means restaurants will be able to reopen. So because we have so many questions that we don't have answers, you're seeing that being reflected in the market. And so we're seeing so much market volatility. And we'll talk a little bit about that. The fact that we've triggered market-wide circuit breaker four times in just this past couple of weeks.

Marie-Josée Kravis (12:30):

I mean, you've had a record moves when we speak of volatility, you've had record moves. I think what, eight cases of trading 4% up or down, how are you handling? Do you feel that your technology, your markets are performing well and handling?

Stacey Cunningham (12:47):

Yeah, absolutely. So just like the markets react to uncertainty and they do that in both directions, as they feel they understand better what's going to happen, we see market rebound. That's what we've been seeing over the past couple of days. And so I would urge people to be focused on the long-term, because over the long-term markets can move back quickly as soon as we do get things under control. But you're right over the past month of March, we've seen not only major market moves, we've seen major market volumes. And that means that our systems need to process three times perhaps what the average daily volume is. And even more so, when you look at the number of messages that a system processes.

Marie-Josée Kravis (13:30):

Tell us a little bit about the message traffic, because we hear a lot about volume, but I'm not sure that everyone understands the intensity and the amount of message traffic that you get?

Stacey Cunningham (13:40):

Yeah, some of the peak days recently, we have processed 330 billion messages in a single day. And that is more than three times what a normal day might look like. That's every new order, every new order to buy, new order to sell, new price point, all those are getting processed by the exchanges all the time and exchanges need to be ready at any point in time to have an increased number of messages as market conditions change. And the industry as a whole has done very, very well during this crisis. Now, I understand that markets have been exceptionally volatile.

Stacey Cunningham (14:16):

So I don't mean to downplay that from a market price level, we might not like the prices, but certainly from a market performance standard, the industry has really risen to the occasion. We have not seen delays in messaging and getting responses back. And that's important because I think it would be helpful to understand market dynamics a little bit. And market makers provide liquidity into the market. So that means that their buyers when everyone else is selling, and their sellers when everyone else is buying, and they're there to always ensure that there's a price where an investor can buy or sell. It's really a very sophisticated risk management exercise.

Stacey Cunningham (14:54):

The more effectively they can manage that risk, the more liquidity they can provide, which means better prices for investors. So that becomes even more complicated when prices are moving really quickly, as we've seen over the past few weeks, and they're moving dramatically from minutes to minutes. For market makers, that's critical even at the microsecond level because they can give investors better prices if they can manage that risk better. So there are a number of things that we focus on and to ensure that they're able to manage that risk as effectively as possible.

Stacey Cunningham (15:26):

And that's why our technology matters so much, though you mentioned NYSE Pillar, that's the technology plot from that we rolled out last summer on NYSE. And what's most important about that is not how fast it is, but how consistent it is, so that every time a market maker or any one of our clients sends us a message, it takes the same amount of time to get that message back so that they know they can manage their risk better if they know that the system is operating the way it's expected to. They're able to price that in.

Stacey Cunningham (15:56):

And so that's really important part of the equation. So it's really critical that our systems perform well. And what we've seen under this enormous amount of strain, we have not seen a degradation of that performance that our systems are continuing to perform. It's the same idea of somebody answering when you're calling your broker dealer. You want them to pick up the phone right away. And that's what the exchange is doing. We're just doing it through with 330 billion messages in a day. And so that's why it's so important because it does ultimately mean to better prices for investors at the end of the day.

Marie-Josée Kravis (16:30):

So you don't feel that you need to revisit protocol calls to further protect markets as some have suggested?

Stacey Cunningham (16:36):

Yeah, so I think that there's a couple of different things. One is how are markets functioning and working and they're functioning well. There is a lot of talk about, should the markets stop, right? Should we stop trading entirely? Should we be putting a pause on the market over overall? And I think the fact that we have the market-wide circuit breakers is by design. That was a pre-planned response to extreme market volatility. And the reason why it's important is because it introduces certainty. And as I mentioned, anytime we can have more certainty in the equation, we can better manage risk for investors. But even discussing closing markets can actually increase that level of uncertainty if people feel like they're going to perhaps be stuck with a market closed and they won't have access to their money and they don't want to be in that situation.

Stacey Cunningham (17:28):

It can actually put selling pressure on the markets already. And we saw that in 1987. After the crash of '87, as soon as it was discussed that perhaps markets could close, we saw additional selling pressure on the market. In response to the crash of 1987, the Brady Commission implemented market-wide circuit breakers. Now, I've spoken to Secretary Brady, former Treasury Secretary Brady, a number of times over the past a week or so, because he's seeing that creation, those market-wide circuit breakers live in action now, and also feel strongly that the reasons they were introduced still apply and that giving investors an opportunity to take a step back, take a deep breath, understand what's happening in the market, provide an opportunity for the other side of the market to show up and slow things down a little bit, but not actually removing the right to trade, to have access to your money is a really important part of keeping the markets open is really important.

Stacey Cunningham (18:27):

And I think we can't overstate how important it is because investors, one, the markets are a reflection of public sentiment. And that's useful information for everyone who's making decisions around our government, our legislators that are making decisions around actions to take, seeing how severely people are responding is really important information to have. If you close the markets, you also don't eliminate any of those underlying concerns that exist, that are driving markets down. And you're more likely to see even more volatility once you reopen. And third, and frankly most importantly, you're denying people access to their money.

Stacey Cunningham (19:06):

And if in this time of need, when there are more people who may need to go access their money, even if they don't like the prices, we can't take that away from them. So if you're talking about a long-term market stoppage and that would be a long time that you're saying, "Hey, you can't, you can't have access to your funds." And that's certainly not something that we would do. And all the conversations that I've had with other exchanges, with our regulators, with our government, no one is suggesting that they're even considering closing the markets[crosstalk 00:19:39].

Marie-Josée Kravis (19:38):

In fact, wouldn't you argue that it's at moments like this, that moments like this really highlight the importance of capital markets?

Stacey Cunningham (19:47):

Absolutely. I mean, you still have companies looking to money so they can do to take action. And this is really a time when the capital markets are even more important to so many of those companies. And I look at the companies that are listed on the New York Stock Exchange, we started over a week or so ago, starting to keep track of all the actions that they're taking to help contribute to the solution for this outbreak. And there are hundreds of actions we started to track and that's not a comprehensive list, whether it's 3M and GE-

Marie-Josée Kravis (20:22):

I think, could you share some of those with privacy?

Stacey Cunningham (20:26):

It's for GE, 3M, all focusing on protective gear and introducing new N95 masks to protect our healthcare workers, Merck, similar, doing same thing, Johnson & Johnson working on vaccines and having the ability to help provide medicines to offset this. So many of the technology companies that we have, like Slack who provides workplace agility, as so many people are moving to work from home, companies like PagerDuty, Box, Salesforce, they're all offering their services for free to small businesses that might be struggling or trying to give them tools that they can use during this time. Unilever is providing all sorts of sanitizers and soap.

Stacey Cunningham (21:14):

I mean, I could go on and on, there's literally hundreds of examples of steps that companies are taking to help solve the crisis. And I think that's really important because we are a united nation and we're all coming together to put our best efforts. Hanes turned over their clothing manufacturers, to turn it in to be able to manufacture face masks as well. So I think all of those things we're seeing and the capital markets are giving people the ability to continue to have access to money so they can do those things.

Marie-Josée Kravis (21:43):

So you were once a floor trader? In fact, I think that's where you started at the exchange as a floor trader.

Stacey Cunningham (21:51):


Marie-Josée Kravis (21:51):

And I was wondering if you'd share from not only the vantage point as the head of the NYSE, but also from your past experience, what are you seeing? What do you think it means? What are the macro trends that you think will be longer lasting?

Stacey Cunningham (22:10):

I'll touch on the floor trader aspects for a moment, because this is a challenging period for the floor traders, because they are a very patriotic group and feel strongly about the value of our capital markets in fighting anything that comes our way as a nation. And part of the way they fight is by functioning, making sure the markets are functioning well and dampening volatility and coming to work. So whether it was 9/11 or historic events that are endless, those traders always showed up at work to make sure that the markets kept functioning. So being asked to do that from the sidelines is tough for them because its just a want to help. And so that's a bit of an adjustment. I do think that markets move more quickly. You We've seen a lot of shifts in market trends over the past few weeks and they move more quickly.

Stacey Cunningham (23:03):

We're seeing that reflected, but the anxiety is also unprecedented. So I don't think this is just a about algorithmic trading. This is about unprecedented levels of concern, and you're seeing them in the market, but markets respond very quickly. So when you see good news too, they will respond to that also. So that's why I feel like it's very important for investors to not be trying to trade this market, because if they can just take a step back and wait for us to get some certainty around what the solutions are and where we need to go, I do think that we have the ability to recover from this. And everyone is focused on finding the solution, whether it's the stimulus package that's put together or the Fed actions that they've taken to address some of the illiquidity that we've seen in pockets in the market, people are focused on solutions. And I'm confident that we will get through this and we will get to the other side. It's just unclear how exactly how long that's going to be.

Marie-Josée Kravis (24:02):

So let's talk a little bit about the Intercontinental Exchange. I mean, the New York Stock Exchange is part of ICE and across ICE markets. How are other asset classes performing or reacting?

Stacey Cunningham (24:16):

Yep. Broadly markets are functioning well, are certainly the future side at ICE. Our future trading has been very smooth. We have had plenty the liquidity there. In the bond market, we have seen some difficulty with liquidity. That's already been dramatically improved over the past few days with the substantial actions that the Fed has taken to address it. One thing you see people talking a lot about also is the impact of passive investment and ETFs. And we operate the largest ETF market with 75% of ETF assets under management. And so we very closely watch this and you'll see some commentary pointing to the fact that ETFs might be discounted from their actual value. And really what we've seen is that ETFs are becoming a price discovery mechanism on their own. So as we've come into the market in the morning, very often the futures have been in a limit state.

Stacey Cunningham (25:09):

So those market-wide circuit breakers that we touched on, they're triggered by a 7% downward move in the S&P 500 index. But that S&P 500 index enters a stoppage of trading, a limit state, well, not a stoppage of trading, but it's not out to decline more than 5%, as a circuit breaker that they have. So it's hard when you're coming in the morning, when the futures are on a down 5% limit state to no, are we actually going to trigger that 7%? You've seen the ETF that are actively trading in the pre-market really become that price discovery so that people get a sense of, where would the market be down? So now people are also looking at, where is SPY trading at 925 to get a sense of, are we going to trigger a market-wide circuit breaker?

Stacey Cunningham (25:58):

And it's actually done a very effective job of predicting where the market was going to open and what those prices were. I mentioned some of the liquidity issues that there were in the bond market. In the fixed income space, ETS have actually been a helpful price discovery tool where the bonds were not trading liquidly and there were some bonds that for several days they weren't traded, yet the ETFs were still liquidity and price and price discovery. So you saw disconnected prices between ETFs and their mutual fund NAVS, and those mutual funds were using a fair value process, not pricing exactly what the bonds could be traded for in the dealer market. So ETFs actually helped to show real time valuations of the market about the actual bonds trading. And so as we go through the postmortem on this market period, we'll look at where are there things we can benefit from going forward to provide some more transparency to investors and better manage risk in the future.

Marie-Josée Kravis (26:59):

So besides ETFs and the role that they've played in this recent turbulence, are there other areas that you're looking at, in fact, in the long term in doing your postmortem to improve transparency and market conditions?

Stacey Cunningham (27:13):

Every time there's a major market event, the industry comes together and very constructively looks for lessons learned, and how can we improve resilience? And we have done a very good job of introducing more resiliency throughout the years. You don't actually get to see the results of that work until the major market event. And I suppose that's a good thing, but you want to see where you can fine tune it. So we definitely come together and work really hard to look for ways to improve and we've done that. I mean, when the market-wide circuit breakers were first introduced in 1988, they were based on the Dow and they were point based. It was a good opportunity to modernize those by moving to percentage based and focusing on the broader S&P 500 index.

Stacey Cunningham (27:58):

We'll go through that exercise of looking at lessons learned and putting in additional protections in the overall market that we can benefit from, just like we're going to change everyday behavior. And I imagine that coming out of this pandemic, people will be better about washing their hands and using sanitizer. And I think we'll see the same kind of steps that we take in the markets.

Marie-Josée Kravis (28:24):

If you're looking ahead. One of the questions, one of our members was asking the question of whether you thought there'd be a pent up demand for IPOs going forward if you look a little bit beyond this crisis, no one wants to say a time, whether it's a second half of the year or next year, but do you think that there's this bill up in demand for IPOs it might appear?

Stacey Cunningham (28:50):

Yeah, I think there are a lot of good quality companies out there. Many of them are taking actions right now to continue to help and support their communities and communities more broadly. And when markets become more stable, I think we'll continue to see them look to access the capital markets. There still are companies that are considering it even during these turbulent times. Just three weeks ago we had an IPO that raised $2 billion in light of the massive market moves, and they're a Canadian company called GFL, and they provide sustainable waste management and they successfully launched during significant market volatility.

Stacey Cunningham (29:29):

So I don't think the... Certainly, there are many companies that are putting off their timeline and they're likely looking to later in the year, but capital markets are still going to be an avenue for some companies, even as they are evolving to the changing conditions. And it varies how much the outbreak impacts their over their business model themselves as well.

Marie-Josée Kravis (29:52):

So what are you worried most about, I mean, short-term? And then we'll talk maybe about the medium and longer term, what you're most excited about.

Stacey Cunningham (30:01):

Yeah, I think short-term, I'm most concerned about how rapidly we can get money to those who need it. So I just think about my local restaurant laying off 70 people right away because they didn't haven't choice. And I think this is about helping to find ways to get money into people's pockets as quickly as possible. And I think if we can do that really effectively, we can help limit some of the long-term damage, but it means we have to move fast. And from my conversations that I've had with our government and others, people are very focused on taking those actions. We just need to make the right ones quickly, get it done quickly.

Marie-Josée Kravis (30:43):

So you're concerned about getting money into the hands of people who obviously are furloughed or let go and so on and so forth. But there's also the worry about keeping growing con-, I mean, going concerns going because after this if those restaurants or those small businesses or the dry cleaner, what have you have this appeared there won't be jobs for people to return to.

Stacey Cunningham (31:07):

Yes, absolutely. I mean, I do think that that's why the faster we can get a handle on how to have protective tools to protect people in a way that they can go back to work. And I mean, I think about it even for our own business. We fully intend to reopen the trading for floor. We're not going to do that until we can keep people safe, but that doesn't mean that has to happen after the virus is completely eradicated because that's not realistic.

Stacey Cunningham (31:32):

I think much before that point we're going to get a sense of, how can we test people for antibodies? How can we test people to see if they are carriers? I think all of those tools will have available to us at some point. And I'm encouraged by all the work that the private and public sector is doing to get to that point more quickly. And I think that's when we can start getting people back out to living in closer proximity and to limit some of the social distancing that we've put in place.

Marie-Josée Kravis (32:00):

So you think the ability to test and to measure will be probably the determining factor to allow businesses to reopen?

Stacey Cunningham (32:10):

I think it's going to play a big role. I think if we can give a level of confidence that we're not exacerbating the pandemic and that we can get to, there's sort of two steps to it. One is wanting to actually limit the negative impact. If we know that we're not enhancing any negative impact, that's one thing, and also just deal addressing people's anxiety. So there's the combination of, can we keep people safe and will people feel safe? And those are too related but different things and we need to be able to do both of those things. And I think testing is going to play a big part in that.

Marie-Josée Kravis (32:46):

Where do you see the New York Stock Exchange, let's say in two or three years assuming no other surprises?

Stacey Cunningham (32:53):

Well, I think we'll continue to have sanitization stations all over the trading floor and like we have introduced. And we took a number of precautions, but yeah, it's really reflective of how rapidly this has been unfolding. It was only just four or five weeks ago, less, maybe three and a half weeks ago, I was out at a conference across the United States and not thinking about getting on an airplane and within a week after that, we were sending people home and having them not come into the building. So we first went through limiting the number of people in the building. Then we were limiting 700 employees home two weeks ago so that they could work from home and not be in the building. And then we closed the trading floor this week. So yeah, I think we've seen how quickly everything has rapidly evolved and will continue to see that. So I think some of those-

Marie-Josée Kravis (33:44):

You had to do an outstanding job also, testing all your systems to make sure that they'd operate electronically with this floor closed. That must have-

Stacey Cunningham (33:52):

Yeah, I'll tell you we didn't do that.

Marie-Josée Kravis (33:54):


Stacey Cunningham (33:54):

That wasn't something we had to do over the past few weeks, because we do that all the time. So we don't get to predict when something might happen in the market, you don't get that. No one gives us a heads up that, "Hey, you might, in the first quarter we're going to see some major market activities." So we have to always be ready for that. So we did the most of that work as we're constantly upgrading our system. So as I mentioned, the technology migration we did over the summer, that was when we were doing a lot of testing about how the systems would perform, even testing remotely, to be able to trade without the brokers and without our market makers in the building, we test that every quarter.

Marie-Josée Kravis (34:32):

So that's regular business practice for you?

Stacey Cunningham (34:33):

Yeah, it is, it is. And so we didn't make any changes with respect to our systems in advance of moving to fully electronic on Monday. And that's an important part of how we think about business continuity, so that people could, so our customers aren't... We're not asking our customers to make changes as they're coming into the market. And they're also dealing with many of their own challenges as so many of them have moved to split workforces and working from home. Where we did see as many other companies also saw, a bit of a scramble, was just making sure our employees could effectively work from home. And you mentioned we're part of ICE with 6,000 employees moving a workforce that's largely and in the office workforce to pretty much 100% work from home is a shift.

Stacey Cunningham (35:22):

Now, we always had the ability to work remotely, but when you put everybody on a work from home system at the same time that so many other businesses are locally doing the same thing, making sure that we can work effectively and having enough bandwidth and the technology resources to do that when the entire city is doing the same thing was certainly a large feat. And I give a huge shout out to our IT team who really did a fantastic job of getting this company a remote access at large scale.

Marie-Josée Kravis (35:57):

So you mentioned that you intend to reopen the trading floor, is that the big differentiators that defines the New York Stock Exchange or?

Stacey Cunningham (36:09):

Yeah. When you look at how we trade stocks, we trade them electronically and we layer human judgment on top of that. So what we've seen when we move to electronic trading is, as a result that combination leads to less volatility in our stocks. So people step in and the offset volatility, there are tons of examples over the past few weeks where those people looked at what was happening and very effectively stepped in to provide more liquidity. And I'll give you one example, two weeks ago when the president announced as we were into the market close, that he was going to fill the oil reserves, that was very dis-, there was a lot of buying interest in oil stocks, right at the end of the day. And we saw our market makers slow that down and able to find the other side of that trade and dampen volatility, which worked very, very effectively.

Stacey Cunningham (36:56):

So our stocks trade was less volatility. When we move to fully electronic, they still trade with less volatility because we have market makers that are assigned to, there's certain obligations. And so those obligations, they still are meeting, even though they're fully electronic, but we did see, it's not quite as good as when they were live. So we see that sell off. It's better than fully electronic markets without market makers, but it's not quite as good as when you have people sitting on the floor.

Stacey Cunningham (37:23):

So that's why we would go back to that methodology. Certainly, the level of human involvement is even more significant during times of stress. So volatility in the market, IPOs, anytime there's a really complex situation, there's more human involvement. When it's not complex, they're automating a lot of that work and they're using algorithms to trade. So yes, we can do that, but we will want the full service offering as soon as we can.

Marie-Josée Kravis (37:48):

I'm glad that you mentioned oil markets because we talked very much about COVID-19, but at the same time, and maybe not to the same extent, there has been this tension in oil markets with the Saudi-Russian tensions and an overall sharp decline in demand. So I wonder if you comment on oil markets and how that's affected the market conditions?

Stacey Cunningham (38:10):

Yeah. And we have a front row seat to that because of the oil futures trading that we do. And we've seen that actually has worked pretty effectively. A lot of the commercial market participants that we work very closely with on the ICE side, feel like they're effectively getting the risk management they need with that. So certainly that sector is under strain and it's very inopportune timing to have the pandemic happening at the same time that there's this oil battle. So I think that timing is unfortunate, but companies are managing through it where we've been working with, so many of them are listed on the New York Stock Exchange. We sort of see that from the corporate side, as well as being the futures exchange that helps them hedge a risk. So the markets are operating very well.

Marie-Josée Kravis (38:57):

And what about other commodities? Are there other commodities that you feel that are red flags right now?

Stacey Cunningham (39:05):

No. I mean, we've seen movement in the gold markets, but I think right now what we're seeing is there's a lot of quick reaction to conditions. And I really think you're going to see things normalize as soon as people have some color. And that doesn't mean go back to where they were. I just think you'll see more stability. And as we answer a lot of the questions that are outstanding, there's going to be a higher degree of confidence in what parts of the economy are really going to be impacted and where can we recover? I mean, certainly the airline stocks are under tremendous pressure. I mean, if you look at all the different parts of the economy and where there's a challenge, that's going to be one, and this isn't like the financial crisis where there was actions that were taken that sort of contributed to the challenges. But what we're seeing is, this is no fault of their own. I mean, this is a global pandemic that impacted them across the board and-

Marie-Josée Kravis (40:04):

Yeah, it's not anyone's control.

Stacey Cunningham (40:07):

Not anyone's control. I mean that's why I think we really need to focus on what we can control and because some things you can't control. And so let's set those aside, but let's focus on the things that we can absolutely control ourselves. And so that's where I think people will be focused. And then also, where can we give support? And so we've seen the government already indicating that they'll help the airlines in those sectors where they need to be supported.

Marie-Josée Kravis (40:32):

Stacey, I'll ask you one final question, what's your bet? We've had a Stimulus Bill passed, in fact today, do you think that's enough or will there be another one in the next couple of weeks? I heard that Speaker Pelosi said there could be more.

Stacey Cunningham (40:47):

I would not be surprised to see further actions taken as we have more clarity around where help is needed.

Marie-Josée Kravis (40:54):

Well, I think you've been very wise in saying already early on in this conversation that there'll have to be a postmortem. And when we have a postmortem, we'll have a chance to examine, the lessons learned and what went wrong and what worked. And I think that's that's how you handle these situations. It's hard to-

Stacey Cunningham (41:13):

Yeah, I mean, that's how we run our business. We run very sophisticated technology platforms. When you have an issue with your technology, you focus on fixing it and then you set your postmortem for later. And so I think you want to make sure you're putting all of your energy into a solution and then with clear heads, think about a response. And I think there's a very important distinction between reacting and responding, and we need to respond thoughtfully and carefully. And those responses carry you through crisis for years to come.

Stacey Cunningham (41:44):

And so we have a whole toolkit of responses for market conditions, and we've been using all of them. It's not just market-wide circuit breaker. There are a number of things that we've been using across the exchanges to dampen volatility and address some of the concerns. And I know that there are plenty of people that feel like the markets have been selling off dramatically, and we should just stop the pain. There's a reason that one's not in the toolkit.

Marie-Josée Kravis (42:11):

Yeah, we need well-functioning capital markets. And I'm glad that you're at the helm of one of the most important exchanges. And you've taken the time, I think we've run out of, we've exhausted our time, but you've taken the time. And as I said at the opening you've taken time while the markets were open to speak with us. So we deeply appreciate that and wish you continued success and I can't say less volatility because that's something that's beyond our control, but at least a continued effectiveness and efficiency of your systems. Thank you, Stacey.

Stacey Cunningham (42:45):

Thank you Marie-Josée. Thank you, Barbara. Thanks to everyone. I wish everyone a safe and well rest of the week.

Josh King (42:53):

Thank you to the Economic Club of New York and Marie-Josée Kravis for hosting this remote event and allowing us to share this conversation with our Inside the ICE House audience. And that's our conversation for this week. Our guest was Stacey Cunningham, President of NYSE Group, and the 67th president of the New York Stock Exchange. If you like what you heard, please rate us on iTunes so other folks know were to find us, and if you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @ICEHousePodcast.

Josh King (43:27):

Our show is produced by Pete Ash with production assistance from Ken Abel and Ian Wolf from their remote locations. I'm Josh King, your host signing off from the Inside the ICE House remote studio in the Catskills of upstate New York. Thanks for listening. Stay socially distanced and wash your hands. We'll talk to you next week.

Speaker 1 (43:49):

Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor it's affiliates make any representations or warranties, express or implied as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of length or clarity.

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Information contained in this podcast was obtained in part from publicly available sources, and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice.