The 213-year-old New York Stock Exchange (NYSE) has vaulted into the top ranks of electronic stock trading, announcing a merger with all-electronic rival Archipelago Holdings Inc in a stunning move that will also transform the NYSE into a for-profit, publicly traded enterprise.
Competitiveness
The NYSE, famous around the world for its busy trading floor, says it has no intention of becoming an entirely computer-based exchange. Instead, by offering a fast electronic option alongside the slower but less volatile floor-based operation, the NYSE hopes to effectively compete with its chief US rival, the NASDAQ Stock Market Inc, and tackle increasing global competition.
"This is an essential step to maintaining our global competitiveness and leadership," NYSE chief executive John Thain said on Wednesday. "I believe that the combination of Archipelago and the New York Stock Exchange will be the leading securities market in the United States and in the world."
The new entity, a holding company to be called NYSE Group Inc, will spin off the NYSE'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. That part of the deal answers the demands of some NYSE members who have been agitating for the exchange to turn for-profit in order to better compete as a business.
"I think the regulatory structure we're proposing will be a model for other self-regulating agencies," Thain said.
Pending regulatory approval, the merger is expected to be completed in either the fourth quarter of this year or the first quarter of next year, Thain said.
Major coup
Officials with both exchanges, in a conference call with investors, said the combined company could see US$100 million in savings this year and next, plus another US$100 million in 2007.
The deal is a major coup for Thain and a boost for a stock exchange that in recent years has been most notable for the controversy over the US$187.5 million pay package given former chairman and chief executive officer (CEO) Richard Grasso.
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