NYSE president talks IPO market, volatility, and ESG investing

New York Stock Exchange President Lynn Martin speaks with Yahoo Finance's Brian Sozzi about the past year in markets, the IPO pipeline, the outlook for 2023, and ESG tools and investing practices.

Video Transcript

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JULIE HYMAN: Brian Sozzi he had a chance to speak with the president of the New York Stock Exchange Lynn Martin. She weighed in on the IPO landscape for the year and beyond, upcoming tech initiatives for the Stock Exchange as well.

LYNN MARTIN: It's been a really volatile year, as you point out, for investors. But one of the things I'm most proud of is how our systems have performed. We're seeing record response times. We're processing half a trillion messages a day incoming to the New York Stock Exchange. And we're seeing average response times up 30 microseconds.

So I couldn't be prouder of our team. We have done what our job is to do in times like this, operate the most transparent markets in the world in the most efficient manner possible.

BRIAN SOZZI: You have a really extensive tech background. How have you invested in technology this year to make things just work so seamlessly in a year where we have seen massive volatility spikes?

LYNN MARTIN: Yeah, I mean, it's something that I monitor quite closely, along with my team. You know, how are we doing in terms of message rates? Do we need to add more capacity?

I'm really proud of the fact that we were able to complete the migration for one of our options' platforms to our "state of the art" pillar system. So given the increase in messaging we've seen, couldn't be happier with the way the year has gone.

BRIAN SOZZI: Lots more to talk about, of course, markets, deals, you name it. But as you look towards next year, where are you focused in terms of tech? What's your one or two biggest initiatives?

LYNN MARTIN: I continue to be focused on making sure that the NYSE operates the most efficient markets possible. I'm really continuing to talk to those companies who are looking to go public once the volatility calms down in the market. The pipeline continues to be incredibly strong.

So we're really excited about the fact that when the market calms down a bit, when there's a bit more certainty as to where the Fed's going and other macro factors are headed, I think we'll have a successful spat of IPOs.

BRIAN SOZZI: In terms of IPOs, what does that pipeline look like? Big companies or smaller companies? Take us through it.

LYNN MARTIN: It pretty much runs the gamut. You've got tech companies. You've got consumer companies. You've got health care companies. All looking to go public. All looking to tap the public markets. This year has been a muted year in terms of IPOs. IPOs are down about 85% versus last year. I like to refer to it as the other tail.

BRIAN SOZZI: You said that number. I was going to say it, but it's been a tough year.

LYNN MARTIN: It's been a tough year in terms of companies coming to market. But the pipeline is tremendous. The value of the US public market currency has never been stronger. It's just a question of when.

BRIAN SOZZI: What are companies waiting for? Is it a Fed pivot. Is it stock market just not having these volatile spikes. Is there one thing you hear when you talk to folks?

LYNN MARTIN: Volatility. Volatility to come down. You know, the benchmark that I always look at, the VIX. If the VIX is above 20, it's a really volatile period of time. You really want the VIX to ultimately be below 20. This year, it's been kind of around 30. So that's really what is worrying private company CEOs.

BRIAN SOZZI: When do you see the deal, that backlog, loosening up. Is it more of a second half event or we might start to see things pick up in the middle of next year?

LYNN MARTIN: It's hard to say. You know, it also depends on the profile of the company. We at the NYSE had the largest IPO of the year, Corebridge, which went which went live in the public markets September 15 of this year. Raised $1.7 billion in capital. Priced in its range and has still continued to trade around its IPO price. So it's been a really successful IPO. It just depends on the type of company. I can't really answer the question.

BRIAN SOZZI: There's a whole generation of investors that have not grown up with a Fed hiking cycle. This has been a strange 2022. And it might be a strange 2023 in that regard, as the Fed continues to do what it does. How do you think the markets might respond?

LYNN MARTIN: I think the markets will continue to try to find their footing. The one thing markets don't like is to be surprised. I think we've all seen that. Whether it's the Fed not doing what it's gonna say, the Fed putting out the additional increases, increasing the target rate, whatever the case may be. Markets don't like when they're surprised so that's what's really been causing the volatility.

BRIAN SOZZI: You've also been-- you've been talking recently about the ESG and disclosures. Where are you with that in terms of companies looking to come public?

LYNN MARTIN: Yeah, it's actually one of the primary topics that I talked to both our existing public company CEOs and private company CEOs. Our position is that we provide tools. We provide ESG tools that allow customers to meet whatever ESG mandates they're looking to achieve.

For example, diversity. Diversity is an area that we feel very strongly about. We have the board advisory council. More than 400 diverse candidates that are board ready. So that's an area we've had tremendous amount of success, both with public and private companies.

BRIAN SOZZI: Are some of these ESG requirements or potential requirements, are they too stringent? Should somebody not investing in a company because they make oil?

LYNN MARTIN: I think it is down to whatever your investment strategy is. And it, in my mind, comes down to disclosures. I don't-- in terms of the individual sectors, the oil industry is one that's, you know, near and dear to my heart, coming from the ICE side of the business.

The oil industry has done a tremendous amount of trying to move from brown to green in a responsible fashion. And what I mean by that is they're trying to do it without deeply affecting the consumer's pocketbook. So I have a tremendous amount of respect for that sector in particular.

BRIAN SOZZI: You're, I think, coming up on the one year mark since you were announced as the president of New York Stock Exchange. What has that first year been like for you?

LYNN MARTIN: It's been an interesting year, a year filled with surprises. I didn't know there was going to be a war between Ukraine and Russia. I didn't know there was gonna be record inflation and record volatility throughout the year. But it's been a tremendous year. You know, we have the greatest community of CEOs. I've really enjoyed getting to know the CEOs of our-- of our NYSE community and figuring out how to better serve them.

BRIAN SOZZI: How have you navigated this environment as a leader? How are you different today compared to 12 months ago?

LYNN MARTIN: I actually come back to one of my core principles. And one of my core beliefs is that you can never overcommunicate. And we've taken a very deliberate step in NYSE to be very public, to be out there, to be on as many events as possible, to really give the market some calmness, to get-- to tell the market what we're seeing since we're seeing all different sides of the equation on a variety of different issues.

BRIAN SOZZI: Walking around the New York Stock Exchange floor, there's so much history in here. But it feels a little different. There's new media booths in here. There's just something else in here. Talk to us about re-inventing the floor. What's the state of the New York Stock Exchange trading floor?

LYNN MARTIN: Well, the floor, especially in the volatile conditions, the traditional role of the floor has never been more irrelevant. And that's something that resonates with people we're talking to that are private companies looking to come public.

The role of the DMMs here is to really mitigate the volatility in the market. And we've proven through data that our market model has caused NYSE-listed stocks to trade with less volatility, the open and the close, as well as throughout the course of the day. That's money in the hands of our companies' CEOs when they think about share buybacks and those types of issues.

BRAD SMITH: That was New York Stock Exchange President Lynn Martin with our own Brian Sozzi. We will be right back.