NYSE to buy electronic rival

updated 12:48 p.m. ET April 21, 2005

NEW YORK - The New York Stock Exchange, famous around the world for its busy trading floor, is getting a computerized boost — and will be worth a lot more, too.

The 213-year-old exchange vaulted into the top ranks of electronic stock trading Wednesday by announcing a merger with all-electronic rival Archipelago Holdings Inc.

The stunning move, which took Wall Street by surprise, will also transform the NYSE into a for-profit, publicly traded enterprise.

Those busy floor traders, whose auctions for stocks help keep prices stable, won’t go away. Instead, by offering a fast electronic option alongside the slower but less volatile floor-based operation, the NYSE hopes to compete more effectively.

Specifically, the NYSE hopes to challenge its chief U.S. 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. “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 NYSE’s 1,366 seat holders, its current owners, 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, Thain said at a news conference.

Using the value of the NYSE’s latest seat sale — $1.62 million — as a guide, the NYSE is roughly valued at $2.2 billion. Archipelago is valued at $844 million using Wednesday’s closing stock price.

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