- The Washington Times - Monday, January 15, 2001

John Hilley's vision of a world where the stock exchange never closes and where a trade is only a mouse click away seems more possible now in the age of the Internet. But what is possible is seldom easy, a lesson Mr. Hilley has learned as he has tried to convert vision into reality.
As chairman and chief executive officer of Nasdaq International, Mr. Hilley heads up Nadaq's effort to carry the gospel of high-growth, technology-oriented investing to lands far and wide, and especially to Japan and Europe, the two main centers of stock trading outside the United States.
"We're trying to establish Nasdaq as the global exchange," Mr. Hilley says. "And I think you'll see real consolidation [among the world's stock exchanges] over the next five years."
The stakes are enormous. In 1999, Nasdaq estimated that there were 160 million stock market investors, mostly in the United States and Canada. By 2005, Nasdaq expects that number to swell to 500 million investors scattered all over the world. And a global exchange could reap the benefits if only it existed.
For Mr. Hilley, a longtime Senate aide and former chief congressional lobbyist for the Clinton administration, running Nasdaq International has called up all the political skills he can muster. Stock exchanges are more than businesses, they are prized national symbols of financial prowess.
Convincing them and the politicians to subsume themselves in a more global endeavor has required as much attention as did the sometimes vain and mercurial 535 members of Congress.
"I'm working as hard as I ever did in government," Mr. Hilley says with a laugh.
After wrapping up his stint at the White House in January 1998, Mr. Hilley got to know Frank Zarb, chairman and chief executive officer of the Washington-based National Association of Securities Dealers, the trade association that is also the parent of the Nasdaq exchange. NASD's presence in Washington, observers note, is one of the signs along with institutions like the World Bank and the International Monetary Fund that Washington is a financial, and not just a political center.
Mr. Zarb convinced him, as Mr. Hilley puts it diplomatically, that "there is a lot of opportunity" for Nasdaq International to grow into a global exchange. Mr. Hilley took a senior executive position that year, and became the top dog in 1999, the year that Nasdaq was on the top of the world, and moved into a small corner office on K Street.
Mr. Hilley, though trained as an economist, nevertheless exudes a politician's sense of the possible. Having struck up working relationships, and sometimes friendships, with the heads of stock exchanges around the world, he is trying to stitch together a framework for trading day and night. Mr. Hilley concedes that the skills he honed as a lobbyist the smooth voice and affable personality that make for a strong persuader will be put to the test in his current job.
Despite all the talk of globalization over the last few years, stock markets remain oddly parochial enterprises. The United States, Britain, Japan and other countries large and small remain home to exchanges that react to one another, but do not function together. Unlike the ebb and flow of business itself, trading in the same stocks does not follow the sun as it rises in Asia, then Europe, then North America.
"It's still a wide-open field," says Frank Fernandez, chief economist for the Securities Industry Association. "Let's face it, most people have focused on the domestic market."
So far, fate has not been kind to Nasdaq's quest to become the global stock exchange. Only six months ago, things looked quite different, especially in Europe, which the affable Mr. Hilley, who learned patience while working in the U.S. Senate, terms "an incredible soap opera."
The London Stock Exchange and Frankfurt's Deutsche Boerse struck a merger deal in 1999, a first step, they hoped, on the road to a pan-European equities market. The two European giants, in turn, agreed in May 2000 with Nasdaq to form a Nasdaq-style exchange for high-growth stocks, especially in the technology sector, on both sides of the Atlantic.
Then the wheels came off. The owners of the London Stock Exchange, the brokers who trade on it, balked at the deal, and the British pulled out. That decision in turn provoked a lawsuit from the Germans. To add insult to injury, the LSE also spent much of 2000 fending off a hostile takeover attempt by a Swedish industrial group. Nasdaq's European strategy was in tatters.
"I think we would have swept Europe [with iX]," Mr. Hilley says ruefully.
"The failure in Europe was a real setback," Mr. Fernandez says. "It cost Nasdaq a lot of time."
Still, Europe is by no means a lost cause, nor can Nasdaq afford to treat it as such. Currently, Nasdaq is negotiating with LSE over how to revive some sort of partnership, even though the Deutsche Boerse is out of the picture.
If Nasdaq cannot conquer Europe as a whole, it will have to do so step by step, Mr. Hilley says. An internal memorandum last year suggested that if Nasdaq could not consummate a deal with LSE by the end of this month, it would pursue a deal with the Deutsche Boerse.
In Japan, Nasdaq has pursued an altogether different strategy with Nasdaq Japan, a start-up exchange. In Europe, Mr. Hilley says Nasdaq has to find partners in order to capture the trading in the continent's major stocks. By contrast, Japan's equity markets remain astonishingly underdeveloped for a major industrial nation, even as more and more companies go public, giving Nasdaq an opening to create an exchange anew.
"Europe is already a more efficient market than Japan, but it is also much more fragmented," Mr. Hilley says.
Nasdaq Japan opened in June, and is now home to about 60 stocks, roughly on pace with the goals set down by Mr. Zarb in a June speech in Washington. By the end of this year, Nasdaq Japan hopes to have a new computerized trading system in place, Mr. Hilley says.
"Right now, the biggest risk is what happens to the [overall] economy in Japan," Mr. Hilley says. "There is a real risk of a slowdown."
In the near term, Mr. Hilley hopes to put into place a system that would trade the roughly 100 stocks giants such as Microsoft and Cisco Systems around the clock in Japan, Europe and the United States.
"It's not that Nasdaq will be open 24 hours per day in the United States," Mr. Hilley says. "But you will have an active market [elsewhere in the world] where you can get a price on a stock."
That achievement will not be the end of the road, by any means, but it would be the first of its kind in the world, a harbinger of things to come. And to get there, Nasdaq will undergo some changes of its own.
In a nod to its aspirations to become a global exchange, Nasdaq International will give up its Washington digs within the next year, and head for a more traditional financial center, Mr. Hilley says. The capital of the world's remaining superpower might be a center of world politics, but as a financial center, it still cannot hold a candle to New York.

Self-portrait

John Hilley, chairman and chief executive officer of Nasdaq International, Washington
Education: bachelor's, master's and doctorate degrees from Lehigh University
Career: Since July 1999, chairman and CEO of Nasdaq International. From February 1996 to January 1998, President Clinton's chief lobbyist on Capitol Hill. Prior to that, chief counsel to Senate Democratic leaders Tom Daschle, South Dakota Republican, and George Mitchell, Maine Democrat
Family: married, two sons in college
Reading: books about science, such as cosmology and evolution


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