NYSE’s Niederauer on the market, a new rival and more

NEW YORK (MarketWatch) — The CEO of New York Stock Exchange and now the president of the IntercontinentalExchange says he is confident the retail investor has returned — but the market gains over the last year may have left investors overconfident.

Duncan Niederauer, who took the helm of NYSE Euronext in 2007 after the biggest financial crisis to hit the U.S. economy since the Great Depression, confronted deflated markets, a loss of investor confidence and infrastructure that had been surpassed by rivals.

Getty Images New York Stock Exchange CEO Duncan Niederauer speaks in September.

On his watch, NYSE Euronext overhauled the technology powering the iconic exchange, battled for more tech-stock listing and pushed to make the floor of the exchange a stage for more than 35 media outlets as well as an event space.

'I am certainly not bearish, but I think people should be thoughtful and cautious.'

Duncan Niederauer

Traders were won over by his straightforward style even as new technology was brought in that substantially reduced the number of traders on the floor, from some 5,000 to about 1,000, according to the exchange.

The CEO also courted several buyers for the exchange before finally landing with the IntercontinentalExchange (ICE) . NYSE Euronext was in talks to merge with Deutsche Börse AG, but that tie-up was eventually blocked by European regulators in 2012. ICE became the buyer with the acquisition of NYSE Euronext in 2013 for $8.2 billion.

Niederauer spoke Tuesday with MarketWatch about what it takes to regain confidence in the equity market; how the industry is changing; and the advice he is giving his new boss, Jeff Sprecher, the CEO of ICE. The interview has been edited.

MarketWatch: What is the retail investor to think since the financial crisis? Where is the confidence?

Niederauer: Post-crisis and the ensuing collapse in the market, there is no faster way to diminish confidence in the market than what went on in 2007, 2008 and 2009. And everyone who invests in the market realizes that markets go up and down, but, when they go down, bottoming out in early 2009, you can understand why the average investor, who is and should be conservative, got frightened away. You compound that with what were also incomplete explanations about the cause.

/quotes/zigman/627449/realtime DJIA 16,158.24, -215.10, -1.31% Dow industrials, 2004-14

Exaggerated or not by the media is irrelevant, there was certainly enough bad behavior that collectively harmed the financial system, and that was reflected in the market's going from 12,000 to 13,000 to below 7,000 in the Dow (DJIA) , and a lot of people lost a lot of money [and] are entitled to be angry.

MarketWatch: What does the industry need to do for investors to gain the confidence in the market today?

Niederauer: Confidence has come back a lot because, I fear, the market has gone up. Retail investors are going to pile in, finally feeling good that the water is safe, and the market was just up 30% last year, and I think we should be cautious. I am certainly not bearish, but I think people should be thoughtful and cautious.

And the industry has to perform. The banks have to perform. The banks have to keep doing what they say they are doing, the banks have to keep lending to Main Sreet and get money flowing back in terms of loans, etc. And we, as an industry, I think a lot of our competitors are doing what I think we have done here, [of] which I am proud, that we have reinvested in the whole plan.

I wasn't trying to have Twitter be the anti-Facebook. If every IPO went as well, it would be good for the industry, but what we were trying to do is what I call an "all-access pass." We wanted that to be completely visible, we wanted everybody to have all the information and built it in real time, and I think that built a lot of confidence.

MarketWatch: The Twitter IPO was a key event for the NYSE after the failed Facebook IPO a year earlier. Talk about what was behind that.

Reuters The Twitter logo is seen on the floor before the company's IPO at the New York Stock Exchange.

Niederauer : You could tell, speaking to people, [that] they were nervous. Market participants were nervous. We had people calling us saying that the other one really didn't go well. We could not afford the slightest thing to go wrong, in our opinion.

The bar was really, really high — more than it has ever been — [because of] that other incident. The onus was completely on us to do everything and more that we could think of to have people feel confident.