The Impact of Major US Exchanges Being Led by Women (Opinion)

Katica Roy is the CEO of Pipeline Equity. The views represented here are her own and do not necessarily reflect the opinion of Bloomberg LP and its owners.

Katica is also a member of Bloomberg Breakaway, a network of CEOs and founders who lead established and emerging industry leaders. Find out more about Bloomberg Breakaway here.

Wall Street’s glass ceiling is hard and unyielding, and yet we’ve recently seen women start to break it. There’s Adena Friedman, who became the first woman to lead a global exchange when she took over as president and CEO of Nasdaq in 2017. There’s also Stacey Cunningham, the first woman to lead the largest stock exchange in the world, the New York Stock Exchange (NYSE). Together the NYSE and Nasdaq represent 39% of the global stock market capitalization, or a share of value that is larger than the value of the next seven exchanges combined.

In additional to Cunningham and Friedman, two other women hold senior leadership positions at the world’s top nine exchanges: Laura Cha, Chairwoman of the Hong Kong Stock Exchange, and Stéphane Boujnah, CEO of Euronext.

Businesses and shareholders should pay attention to these cracks women are putting in Wall Street’s glass ceiling. As more women start leading major exchanges, they are also setting new agendas in equity markets.    

The Women on Wall Street: a New Agenda

The NYSE was founded in 1792, and it wasn’t until 1943, a full 151 years after its founding, that women began trading. Even then they were filling in for men fighting in World War II.

The earliest significant push for gender diversity on Wall Street came from Muriel Siebert, who joined the 1,365 male members of the NYSE in 1967, becoming the first woman to own a seat on the exchange. She was also the first woman to lead a NYSE member firm. For a decade, Siebert, “The First Lady of Wall Street,” remained the only woman to hold a seat on the board.

We’ve since seen progress toward gender equity on Wall Street, albeit slowly. Today women fill 33% of NYSE corporate board seats, hold 47% of all business degrees, and represent approximately 57% of the financial services’ labor base. Still, women make up only 19% of c-suite roles in the financial services industry; part of the gap is due to gender bias starting from the first promotion. Men are promoted 25% more than women in finance, even though women are less likely than men to leave the industry in 11 of 15 career stages.

The women on Wall Street want to change this historic gender imbalance. As Friedman says, “Nasdaq strongly believes that women’s empowerment is a critical pillar of business value creation, global sustainability and essential to creating inclusive, prosperous economies. Nasdaq is committed to giving women every opportunity to succeed and thrive because it ultimately drives better outcomes for our business and stakeholders.”

How Gender Equity on Wall Street Benefits Your Business

Friedman’s statement highlighting the financial upside of gender equity is true. Companies’ stock prices rise after they report improvements in corporate diversity. Investors care about the gender equity of companies because they believe companies with more gender equity have a higher propensity to innovate, a lower propensity to settle lawsuits, and a lower propensity to garner negative regulatory attention. Investors also believe diverse companies deal with fewer personality conflicts, which increases retention and productivity.

In 2014, when Google took the initiative to report about workforce diversity, women made up only 30% of its employee base. The news of such underrepresentation saw the company’s stock fall by .39 percentage points. Researchers projected that had Google’s employee base been 31% women, the company would have added $375 million in market value.

Shareholders are speaking up. If companies are not as diverse as they want them to be, economic repercussions will follow. Strategists at Morgan Stanley studied 1,600 public companies around the world. They concluded that the more gender diverse a public company is, the less volatility it experiences. Further, the shares of public companies with greater gender diversity outperformed shares of less gender-diverse public companies by 1.5%.

It’s not only businesses who need to stay privy to shareholders’ focus on gender equity. The trading floor itself needs to recognize the benefits of gender-balanced teams. 

Why Wall Street Needs Gender Equity

“I have joked that a ‘male’ culture of reckless financial risk taking was at the heart of the global crisis.” That’s what Christine Lagarde, former managing director of the IMF, wrote in an IMF publication about the 2008 financial crisis.

Studies support the claims in Lagarde’s “joke.” Men trade 45% more often, and their increased risk-taking during trades leads to greater losses. Gender-equitable markets not only show lower average volatility, they also report a greater dispersion of volatility as compared to less gender-equitable markets. That means markets with imbalanced gender compositions have a higher chance of experiencing extreme volatility, which occurs when traders make profits from correctly picking stocks. The positive feedback received from profit increases hormone levels and incentivizes greater risk-taking. The momentum builds and continues until a bubble is formed. Eventually, the bubble pops and extensive volatility ensues.

Researchers also found, on average, female traders outperform male traders. Male traders are more likely to suffer the biggest losses and dispersed payoffs. The select male traders who do indeed outperform female traders do so from riding out their luck. While lucky female traders are less likely to take the same path as their lucky male colleagues—making them less prone to extreme profits—it means they lose money less often. In fact, a University of California study found that over the period from 1991-1997, individual female personal investors outperformed individual male investors by 1.44%.

These findings remind us of the importance of having both perspectives—male and female–represented in finance. It also reminds us of the capabilities that women and men uniquely bring to the table.

Welcoming Gender Equity to the Exchange Floor

Our economy needs more women to join the ranks of Wall Street’s female trailblazers. Doing so promotes greater stability in the banking system and fuels economic growth. Business leaders would be wise to realize gender equity.