US regulators have approved the proposed US$8 billion sale of the venerable New York Stock Exchange (NYSE) to a much younger futures exchange. The deal is a symbol of how financial markets are being increasingly reshaped by high technology.
The Securities and Exchange Commission disclosed on Friday that it authorized the takeover of the two-centuries-old NYSE’s parent by Atlanta-based IntercontinentalExchange (ICE). The rival acquiring company, founded in 2000, has expanded rapidly through acquisitions over the past decade.
The SEC said in a filing that it is determined that the merger of the exchanges would comply with securities laws and regulations.
The merger also must be approved by regulators in Europe. The NYSE’s parent is NYSE Euronext, which includes stock exchanges in Europe. The EC, the executive body of the 28-nation EU, gave its approval in June. The deal is expected to close in the autumn.
For each share of NYSE Euronext stock they own, shareholders would be able to choose either US$33.12 in cash, about a quarter-share of ICE, or a combination of US$11.27 in cash and around one-sixth of a share of ICE.
ICE’s offer was valued at US$8 billion when it was announced in December. Based on ICE’s current share price, the deal would be worth about US$10 billion.
ICE shares were up US$0.79 at US$181.14 in trading on Friday on the NYSE. That compares with US$130.1 on Dec. 20, the day the proposed merger was announced. NYSE Euronext shares rose US$0.18 on Friday to US$42.03. They traded at US$32.25 on Dec. 20.
“We welcome the [SEC] decision,” NYSE Euronext spokesman Rich Adamonis said.
ICE spokeswoman Kelly Loeffler said: “We’re pleased to receive approval.”
ICE has said that little would change for the NYSE trading floor — known as the Big Board — at the corner of Wall and Broad streets in Manhattan’s financial district. But the NYSE’S clout has been eroded by the rapid advance of technological and regulatory changes. Its importance today is mostly symbolic.
While brokerage fees for stock trading have declined, futures exchanges like ICE have retained solid profit margins. Futures contracts are written by exchanges and must be bought and sold in the same place — unlike stocks, which can be traded on any exchange.
Buyers of futures contracts commit to buy something at a specified date and price, such as agricultural products like wheat, corn and soybeans; energy commodities like crude oil, natural gas and gasoline; and stock indices and other financial futures. Futures can be used to lock in prices as a hedge against future price movements. They are also used by traders to speculate on prices.