NEW YORK, April 20 -- The New York Stock Exchange on Wednesday said it plans to merge with a major electronic trading network, Archipelago Holdings Inc., signaling a formal move away from its 213-year-old roots as the chaotic, human-driven center of American capitalism.
In a news conference after the closing bell, NYSE chief executive John A. Thain, who has pressed for more electronic trading, said the merged company would be a publicly traded, for-profit enterprise known as NYSE Group Inc. The NYSE is currently a not-for-profit owned by its 1,366 members, mainly brokerage houses and individual floor traders.
The merger with Archipelago will not bring an end to the New York Stock Exchange's trading floor, the NYSE chief executive said.
(Henny Ray Abrams -- Reuters)
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"This is an essential step to maintaining our global competitiveness and leadership," Thain said in announcing the deal, which requires approval from the Securities and Exchange Commission, the Justice Department, NYSE members and Archipelago shareholders. Thain said the deal is "absolutely not" the end of the trading floor.
Thain added that the new company would be able to better compete with exchanges in London, Frankfurt, Toronto and Sydney that are trying to expand their share of trading in an increasingly global stock market.
The combined company would continue to be run from the NYSE's colonnaded headquarters at the corner of Broad and Wall streets in Lower Manhattan, and the trading floor would remain as it is, at least for now. The NYSE already offered limited online trading, but the deal with Archipelago, the largest electronic trading network in the world, would vastly increase the exchange's electronic capabilities.
Thain and Archipelago chief executive Gerald D. Putnam, who would become co-president of the new company, said the combination would significantly improve the NYSE's competitive position in a long-fragmented business that appears to be quickly consolidating.
The Nasdaq Stock Market Inc., for instance, is widely expected to complete a deal soon to buy Instinet Group Inc., another large electronic trading network. Nasdaq also has long considered an initial public offering of its own but has not managed to complete a deal.
Thain and Putnam said that the new company would spin off the NYSE's regulatory arm as a not-for-profit entity called NYSE Regulation, much as Nasdaq did with its self-regulatory body NASD, formerly known as the National Association of Securities Dealers.
As a Goldman Sachs Group Inc. executive before he came to the NYSE, Thain strongly pushed for major investments in electronic exchanges, including Archipelago. Goldman advised both the NYSE and Archipelago on the deal.
Under terms of the deal, NYSE members would receive $400 million in cash and 70 percent of the shares in the new company. Archipelago shareholders would receive 30 percent of the shares. Archipelago's stock soared $1.86, or 11 percent, to $18.76 on Wednesday on rumors of the deal before trading in the stock was halted in advance of the news conference.
