In search of greater stability for their stock prices and a chance to trade alongside the biggest names in finance, regional banks and thrifts have been leaving Nasdaq and listing on the New York Stock Exchange.
Eleven financial institutions, nine of them banks, moved onto the Big Board since last October, according to the New York Stock Exchange's Web site.
For First Tennessee National Corp., which moved to the Big Board on July 30, the reason was to reduce volatility. "The day-traders were wearing us out," chairman, president and chief executive officer Ralph Horn said in an interview last week.
When trading was light, a trader could sell a small amount of First Tennessee stock and drive its price lower, triggering copycat sales, bank officers said. Day-trading, which is often driven by price fluctuations, exacerbates the problem. "Our stock was perfect" for day-traders, Mr. Horn said.
Otherwise, the $19 billion-asset Memphis banking company was happy with Nasdaq, its officials said.
Financial companies that have switched to the New York exchange cite research showing that a stock's trading volume increases when it is listed on the Big Board. They say that generally, the greater the volume, the lower the volatility.
Wilmington Trust Co. of Delaware, which moved to the New York Stock Exchange on Jan. 15, is an example. Its trading volume between February and May was 23% greater than in the same period of 1998.
The New York Stock Exchange's system of "specialists" is designed to keep a balance between supply and demand and reduce volatility.
Stocks listed on Nasdaq are traded through a group of so-called market makers, who match up buyers and sellers through computer trading. On average, one stock will have 11 market makers.
Other financial companies that have listed their stock since October included: Premier Bancshares of Atlanta; Metris Cos. of St. Louis Park, Minn.; U.S. Trust Corp., New York; Washington Mutual Inc., Seattle; Old Kent Financial Corp., Grand Rapids, Mich.; and BancWest Corp., Honolulu.
As part of the trend toward globalization in the finance industry, two foreign-based banks listed in recent months: HSBC Holdings PLC of London, and Unionbancal Corp., a California-based company that is controlled by Bank of Tokyo-Mitsubishi.
Banks also sought to minimize the bid-ask spreads on their stock and improve their visibility before the investment community.
Before moving, Wilmington Trust experienced a $1.50 to $2 fluctuation in its stock price for trades as small as 100 shares, said Ellen Roberts, a spokeswoman. Now "it is unusual" to see fluctuations on trades of that size of more than 12.5 cents.
NYSE's recent coups resulted from an aggressive approach to lure new companies. In its pitch to Wilmington Trust last year, it noted the bank's average spread in September 1998 was 74 cents, compared with 18 cents for industry peers.
The New York Stock Exchange's tighter spreads and reduced volatility help the newcomers court institutional investors, who tend to wince at stocks with wild swings.
"Going to the auction market is what gets us to reduced volatility, price continuity," and reaching large investors, said Ms. Roberts of Wilmington Trust.
Mike Shokouhi, spokesman for Nasdaq-Amex Market Group in Washington, said that while the two exchanges cater to different firms, firms electing an auction-based system may lose liquidity when the specialist halts trading as a result of an order imbalance. While the practice is common on the NYSE, the Nasdaq never halts trading for an issue, he said.