Big Changes For Big Board
The New York Stock Exchange will merge with Archipelago Holdings Inc., an electronic trading company, becoming a for profit enterprise, the exchange announced Wednesday.
The not-for-profit NYSE's seat holders will receive $400 million in cash and 70 percent of the shares in the new company, while Archipelago's shareholders will retain 30 percent of the shares, NYSE Chief Executive John Thain said at a news conference.
"This is an essential step to maintaining our global competitiveness and leadership," NYSE Chief Executive John Thain said at a news conference.
The new entity, a holding company to be called NYSE Group Inc., will spin off the New York Stock Exchange's regulatory arm - recently invigorated after coming under intense criticism for failing to stem a floor-trading scandal - into a not-for-profit oversight entity.
"I think the regulatory structure we're proposing will be a model for other self-regulating agencies," Thain said.
ArcaEx Chairman and CEO Jerry Putnam said the merger would create new opportunities for NYSE Group to expand its trading into other areas, including options and other equity derivatives. The exchange will not trade Nasdaq Stock Market-listed stocks on the floor of the NYSE, but will continue to trade them through ArcaEx's electronic market.
Thain will remain CEO of NYSE Group, while Putnam will become president and co-chief operating officer. The management teams of the two companies will be integrated, Thain said, and a transition team is already working on the deal.
NYSE Chief Financial Officer Amy Butte will become executive vice-president of strategy and product development, while Archipelago CFO Nelson Chai will assume that role for the NYSE Group.
Pending regulatory approval, the merger is expected to be completed in either the fourth quarter of this year or the first quarter of 2006, Thain said. Three ArcaEx board members will join the NYSE board.
The company will continue to be headquartered at its iconic Wall Street building in New York.
Chicago-based Archipelago trades both stocks and options based on stock holdings. Archipelago handles about 25 percent of the trades in stocks listed on the Nasdaq Stock Market, but has made little impact in handling NYSE stocks, where more than 80 percent of listed stocks trade on the floor of the exchange in a specialist-managed auction.
Shares of Archipelago surged 11 percent, or $1.86, to $18.76 on the Pacific Stock Exchange, a regional exchange affiliated with Archipelago, before trading was halted due to pending news. Shares have traded in a 52-week range between $11.50 and $22.90
The 213-year-old New York Stock Exchange is a not-for-profit institution, privately owned by seat holders who have long been lobbying for the NYSE to become for-profit and go public in a stock offering.
By Michael J. Martinez