NYSE looks to future
NEW YORK — Theodore Weisberg has worked on the floor of the New York Stock Exchange for 36 years, through charging bull markets and ferocious bear markets, the 9/11 terror attacks and trading scandals.
Now, however, he’s facing the biggest change he’s seen at the exchange, indeed, in the 213-year history of the Big Board — the acquisition of all-electronic exchange Archipelago Holdings Inc. that, if approved Tuesday by seat owners and Arca shareholders, would propel the NYSE into high-tech computerized trading and make it a for-profit, publicly traded company.
“This is the granddaddy of all changes,” said Weisberg, who owns a seat on the exchange. “You know, the day after all this is finalized, should the vote pass, I’ll come in to work as usual. But from an institutional standpoint, this is about the future.”
The $6 billion agreement, reached April 20 after months of behind-the-scenes work, would create The NYSE Group Inc., with both the exchange and Arca as subsidiaries. It would give the NYSE a much-needed technology platform for trading all stocks, including those listed by rival Nasdaq Stock Market Inc., and give the Big Board critical equity capital to make further acquisitions and face up to increasingly active global competitors.
“The rationale for this deal is a strategic one,” NYSE Chief Executive John Thain said in an interview with The Associated Press. “It turns us into a for-profit company, a public company, and it gives us a broader mix of products, a better revenue mix of products, and also positions us to be competitive on a global basis.”
For the owners of the exchange’s 1,366 seats, the payoff is clear: as much as $5 million in cash and stock in the new company, if the combined company’s stock price holds. For large investors, it means the ability to cut costs by going to the NYSE for not only NYSE-listed stock trades, but also to trade the Nasdaq-listed and over-the-counter stocks traded electronically on Arca.
And for the individual investor, it could mean faster transaction times and, potentially, lower fees.
Archipelago shareholders and NYSE seat owners are both expected to approve the deal in Tuesday’s vote. The exact number of seat owners is not public information, but Wall Street’s major investment banks own multiple seats, as do many individuals.
A handful of seatowners have been highly critical of the merger, claiming the NYSE is paying too much for Archipelago and that seat holders are being shortchanged.
That led to a lawsuit by longtime seat holder William Higgins, who attempted to stop the merger and vote in state court. He said the involvement of Goldman Sachs Group Inc., which advised both the NYSE and Arca in their negotiations, created a conflict of interest. Goldman Sachs owns 15 percent of Arca, as well as a number of seats, and Thain is a former top executive at the firm.
Higgins’ lawsuit was settled last month, with the seat owner dropping his lawsuit in exchange for a new fairness opinion issued by Citigroup, which had no ties to the deal. Citigroup found the deal to be fair.
Yet Higgins’ legal team, which represents nine other seat owners as well, is expected to challenge Citigroup’s evaluation in court Monday, claiming Citigroup took the NYSE and Arca estimates at face value, rather than investigating further and coming up with their own valuation numbers. The NYSE will fight any attempt to derail the settlement.