SEC Approves Merger Of NYSE, Archipelago
Tuesday, February 28, 2006
The Securities and Exchange Commission yesterday cleared the way for the New York Stock Exchange to merge with electronic trader Archipelago Holdings Inc., giving final approval to a deal that will make the NYSE a publicly traded company and end its 213-year history as a member-owned exchange.
The agency's approval was the last hurdle for the transaction, which had already been cleared by NYSE seat owners, Archipelago shareholders and the Justice Department. The deal, scheduled to close March 7, will create NYSE Group Inc., which will trade under the symbol NYX.
Coupled with the decision of rival Nasdaq to buy the online trader Instinet Group Inc., the merger underscores how computer technology has changed stock trading and, more importantly, investors' expectations that trades be executed as quickly as possible.
The two deals will reduce what had been a highly splintered marketplace to just two dominant competitors and sets the arena what could be a brutal battle for dominance in matching stock market buyers and sellers.
As stock-trading commissions have decreased, the business of matching buyers and sellers has become one in which having large daily volume is critical to survival. In addition to direct revenue, large trading volume makes the data that stock markets sell to investors more valuable.
While the deals are of enormous significance to the stock-trading industry, in which different marketplaces compete for listings and orders and to provide market data, it is unclear what the two mergers will mean for individual investors. Some analysts and federal regulators have said the deals should benefit consumers by encouraging greater competition and faster, cheaper stock transactions.
The NYSE is the last big stock exchange in the country to conduct business on a physical trading floor. Adding Archipelago will helped propel it fully into the electronic age. The exchange already offers some electronic trading, but the vast bulk of orders is sent to the floor, where traders called specialists are supposed to match buyers and sellers at the best possible prices for both. NYSE officials have defended the system as efficient, but investors complain of delays that cost them money to the benefit of individual floor traders.
To win the SEC's approval, the NYSE made a number of changes to its proposal, including making its nonprofit affiliate responsible for regulating the exchange more independent from the board of the for-profit entity and making sure market supervision activities were adequately funded.
"The evolution of our major exchanges into for-profit, publicly-traded companies that compete on a global basis will require increasingly vigorous and vigilant regulation," SEC Chairman Christopher Cox said in a statement on the SEC Web site. "More broadly, the Commission is continuing its review of our current regulatory structure for all self-regulatory organizations."
Staff writer Ben White contributed to this report.