It was over in three minutes, from the pop of the first flashbulb to the ceremonial opening trade on the New York Stock Exchange last Wednesday, when the Geico Corp. symbol flashed across the ticker tape for the first time.
But those three minutes were the culmination of years of agonizing by officials of the giant financial services company based in Chevy Chase.
After years of resisting the blandishments of both the New York and American stock exchanges, Geico finally made the plunge.
The stock had been traded over-the-counter among a loosely knit network of brokers and dealers who stood ready to make a market in Geico -- that is, buy and sell Geico stock from the public and from each other.
Geico was among the most heavily traded over-the-counter stocks. On Tuesday, the day before it joined the Big Board, 92,000 shares were traded (although some of it involved double-counting of trades between market makers).
Until Wednesday, 31 brokerage firms made a market in Geico. Now most buy and sell orders will be processed through a single market maker on the floor of the New York Stock Exchange who
However, Geico is so popular among over-the-counter firms that not all of them are willing to cede the action to the New York Stock Exchange.
On Wednesday, six firms continued to make a market in Geico stock in direct competition with the so-called specialist on the floor of the exchange, De Cordova Cooper & Co.
"We're going to prove to the investing public that we can make just as good or better a market in Geico," according to Patrick C. Ryan, vice president and chief of trading at the Washington brokerage house Johnston, Lemon & Co., Inc.
Geico, like the popular Anheuser-Busch Inc., will become one of the guinea pigs in a recent experiment by the Securities and Exchange Commission that allows NYSE member firms (like Johnston, Lemon) to continue to make markets by themselves in a stock rather than being required to funnel customer orders to the floor of the exchange. The SEC rule applies only to stocks listed after April.
NYSE rules used to preclude member firms from making an independent market in a stock listed on the exchange.
In fact, according to Geico chairman John J. Byrne Jr., the SEC rule was one of the considerations that finally helped tip the decision in favor of listing on the NYSE -- a move he said the firm rejected just a year ago.
"We were well provided for in the over-the-counter market. The market makers were not passive. They were excited about us. We felt they were part of the family. In some ways, we now have the best of both worlds," Hanna said.
Because so many brokerage houses made a market in Geico, Byrne said, the company was wary that investors could not always be sure of getting as good a price through a specialist as they could when 31 brokers were competing for business. Furthermore, he said, the company felt that it would damage those market makers who had beed with the stock so long.
Now the firms like Johnston, Lemon can continue to make a make a market in Geico, the company has fewer reservations about listing.
The surveillance the NYSE conducts of all trades and the monitoring of the behavior of specialists -- who are required to match up public trades and step in to buy and sell themselves to maintain a "fair and orderly market" -- were of special concern to Geico officials. Most of their questions on a several hour tour of the Big Board Wednesday dealt with surveillance.
After satisfying themselves that the NYSE would provide as good or better a market for their investors, intangibles played the final role, Byrne said. A listing on the New York Stock Exchange confers a certain status in the investiment community and outside.
"When all is said and done, we want our customers to be confident of us. And we want the Washington community and our employes to be proud of us," Byrne said.
In 1976, Geico was a company in trouble. Once one of the most successful insurance companies in the country, the company had grown too fast at the same time that inflation was driving up claims costs faster than regulators were permitting premiums to increase.
Geico teetered on the edge of bankruptcy. Geico stock once rose as high as $60 a share. In 1976, at the depths of the company's troubles, the stock has sunk to less than $3.
Geico lured Byrne from Travelers Insurance Co. Byrne, and the management team he gradually built, put Geico back together again. If business had an equivalent of the "comeback of the year" award, Geico would have earned it for the decade.
Normally when a company is approved for listing, 11 or 12 specialist firms apply to the NYSE for the right to make a market in that stock, according to one Big Board official. In Geico's case, 26 specialists applied. The award of the Geico stock to a specialist is made by an allocation committee composed of two specialists, two "allied" firms and five brokerage firms.
The NYSE does not allow the company to pick its speicalist, so Geico waited an extra two weeks before listing so it could investigate De Cordova Cooper, which among other stocks also makes a market in International Business Machines Inc.
On Tuesday, 92,000 shares of Geico traded in the over-the-counter market (although some of that volume involved double-counting of trades between market makers). Of those 92,000 shares, Johnston, Lemon handled 11,000. On Wednesday, when trading opened on the NYSE, 21,700 of the 24,300 Geico shares traded went to the Big Board. Johnston, Lemon handled only 300.
On Thursday, in newspaper advertisements, Johnston, Lemon announced that the company would still make a market in Geico. That day, the company handled about 4,500 of the 44,000 shares traded. On Friday, however, Ryan said, the firm traded only a few hundred shares of the 26,000 shares that changed hands. The De Cordova firm handled 23,800 shares on the Big Board.
Ryan said his goal is to handle 5 percent of the Geico volume consistently within 90 days. "We're going to prove that we have the best execution," he said.
According to Ryan, of the nine trades Johnston, Lemon handled the final three days of last week, his firm was able to "provide better quotes than the exchange" on six of them. That means that Johnston, Lemon was willing to offer slightly more to sellers or charge slightly less to buyers.
But it will be an uphill fight for Johnston, Lemon or any other firm that wants to continue to make a public market in Geico. Most major brokerage firms automatically route small trades in an exchange-listed stock to the floor via its computer network.
When Geico was traded solely over-the-counter, a broker would have called up the current offers from all houses that make a market in the stock, then presumably picked the one with the price most favorable to his client.
Still, in large trades, brokers do call up the Geico quotations on their computer screens and go for the best price -- when the market maker can provide the stock iin sufficient quantity. As a result, there seldom is more than a f fractional difference between the price of a stock on the exchange or at the over-the-counter market maker.
But Ryan vowed that "at no time will we do a trade at a customer disadvantage. We will always offer the best or at least a competitive price." d
The SEC put in the new rule about trading off the floor as part of its quest for a "national market" in stocks. About 150 stocks have been listed on exchanges since April, but few have the widespread investor interest that Geico seems to possess. Byrne estimated that Geico should be among the top 20 percent in NYSE activity.