NYSE Euronext to Acquire the American Stock Exchange

[WallstYouth]

NYSE Euronext to Acquire the American Stock Exchange
● Strategic Transaction Creates Value for Customers and Shareholders; Accretive in 2009

● Underscores NYSE Euronext’s Continued Leadership in Global Consolidation

● Strengthens Company’s U.S. Options, ETF and Cash Product Offerings

--Analyst/Investor and Media Briefing: Thurs., Jan. 17, 2008, 5:15pm (NY/ET)--

NEW YORK--(BUSINESS WIRE)--NYSE Euronext (NYSE Euronext: NYX), the world’s largest and most liquid exchange group, has entered into a definitive agreement to acquire the American Stock Exchange® (Amex®). The proposed business combination, which has been approved by both companies’ boards of directors, will significantly enhance NYSE Euronext’s scale in U.S. options, exchange traded funds (ETFs), closed-end funds, structured products and cash equities. Subject to approval by Amex members and customary regulatory approvals, including from the U.S. Securities and Exchange Commission and Department of Justice, this transaction is expected to close in the third quarter of this year and to be accretive to NYSE Euronext’s 2009 earnings.

Under terms of the agreement, NYSE Euronext will pay $260 million in NYSE Euronext common stock for the Amex. In addition, Amex members will be entitled to receive additional shares of NYSE Euronext common stock based on the net proceeds from the expected sale of Amex’s lower Manhattan headquarters.

The acquisition of the Amex provides for a number of additional benefits and opportunities for NYSE Euronext:

Obtain a second U.S. option exchange license, which will enable NYSE Euronext to operate a compelling dual market structure making available to all customers the choice of price-time priority on NYSE Arca and the Amex’s traditional market-maker model;
Provide additional volume to NYSE Euronext’s robust U.S. options business, making it the third largest U.S. options marketplace;
Operate a third, complementary U.S. cash equities exchange, in addition to the NYSE and NYSE Arca;
Strengthen NYSE Arca’s leadership position in ETF listing and trading, joining 381 current Amex ETF listings with 240 NYSE Arca ETF listings;
Offer a leading venue for listing and trading closed-end funds and structured products, including 545 listings on Amex and over 1,000 listings on NYSE;
Realize annualized run rate cost synergies of over $100 million within two years from closing, including technology, data center and staff integration, consolidation of professional and contract services and vendors; and
Relocate Amex’s trading floor operations to the NYSE trading floor.
“The addition of the American Stock Exchange to the NYSE Euronext family is highly beneficial for our customers and shareholders, and demonstrates our ongoing commitment to growing our business and product lines,” said Duncan L. Niederauer, NYSE Euronext CEO. “NYSE Euronext is the established leader in global financial-market consolidation, offering the most attractive and diverse array of products of any global exchange. This transaction is consistent with our strategic objectives and will strengthen our competitive position in the U.S., produce significant operational efficiencies, and create new business opportunities.”

Neal Wolkoff, Chairman and CEO of the American Stock Exchange, said, “The Amex is pleased to join NYSE Euronext and be part of the world’s leading multi-asset global exchange. With the Amex’s diverse business lines and specialization in launching innovative new products, I am excited to be at the helm of the Amex as we complete this compelling and strategic business combination.”

Amex operating revenues for the year-ended December 31, 2007 were approximately $178 million, and the company generated a pre-tax net loss of approximately $36 million. On Dec. 31, 2007, the Amex employed 471 people. Upon the expected completion of Amex’s acquisition by NYSE Euronext in the third quarter of 2008, Amex is expected to operate at a breakeven level for fiscal year 2008, and in 2009 the transaction is expected to be accretive to NYSE Euronext’s earnings.

Lehman Brothers is acting as financial advisor and Wachtell, Lipton, Rosen & Katz is acting as legal advisors to NYSE Euronext on this transaction. Amex is represented by Morgan Stanley as financial advisor and Milbank, Tweed, Hadley & McCloy LLP, and Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal advisors.

Analyst/Investor and Media Briefing: Jan. 17, 2008, 5:15pm (NY/ET)

NYSE Euronext and Amex senior management representatives will host a joint analyst/investor and media call via teleconference today regarding this announcement. A live audio webcast of the conference call will be available on the Investor Relations section of NYSE Euronext’s website, http://www.nyseeuronext.com/ir. Those wishing to listen to the live conference via telephone should dial-in at least 10 minutes before the call begins.

Live Dial-in Information:
United States: 866.543.6408
International: 617.213.8899
Passcode: 19548146


Audio replays of the conference call will be available on the Investor Relations section of NYSE Euronext’s website, http://www.nyseeuronext.com/ir and by dial-in beginning approximately two hours following the conclusion of the live call.

Replay Dial-in Information:
United States: 888-286-8010
International: 617-801-6888
Passcode: 25435287
available 1/17/08 - 1/24/08


Background

On Jan. 14, 2008, NYSE Euronext announced the signing of a definitive agreement to acquire Wombat Financial Software (Wombat), a privately held global leader in high-performance financial market data management solutions.
On April 4, 2007, the shares of NYSE Euronext began trading. The debut of NYSE Euronext followed the successful combination of NYSE Group, Inc. (NYSE Group) and Euronext N.V. (Euronext) and created the global leader in listings, in equity and derivatives trading, in market data products and financial services technology.
On Dec. 12, 2006, NYSE Group announced the signing of a definitive agreement to acquire TransactTools Inc., the global leader in enterprise messaging solutions for the securities trading industry. The transaction closed on Jan. 8, 2007.
On March 8, 2006, NYSE Group completed the merger with Archipelago Holdings to become a for-profit, publicly traded company, trading on the NYSE under symbol NYX.
On Oct. 25, 2006, NYSE Group announced an agreement to acquire the one-third ownership stake in the then Securities Industry Automation Corporation (SIAC) held by Amex for approximately $40 million in order to gain full ownership of SIAC, including Sector, Inc. and SFTI. The transaction closed on Nov. 1, 2006.
About NYSE Euronext

NYSE Euronext, a holding company created by the combination of NYSE Group, Inc. and Euronext N.V., commenced trading on April 4, 2007. NYSE Euronext (NYSE Euronext: NYX) operates the world’s largest and most liquid exchange group and offers the most diverse array of financial products and services. NYSE Euronext, which brings together six cash equities exchanges in five countries and six derivatives exchanges in six countries, is a world leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data. Representing a combined $30.3 trillion/€21.3 trillion total market capitalization of listed companies and average daily trading value of approximately $139 billion/€103 billion (as of September 30, 2007), NYSE Euronext seeks to provide the highest standards of market quality and integrity, innovative products and services to investors, issuers, and all users of its markets. NYSE Euronext is part of the S&P 500 and S&P 100 indexes.

About American Stock Exchange

The American Stock Exchange® (Amex®) offers trading across a full range of equities, options and exchange traded funds (ETFs), including structured products and HOLDRSSM. In addition to its role as a national equities market, the Amex is the pioneer of the ETF, responsible for bringing the first domestic product to market in 1993. Leading the industry in ETF listings, the Amex lists 381 ETFs to date. The Amex is also one of the largest options exchanges in the U.S., trading options on broad-based and sector indexes as well as domestic and foreign stocks.

 

[IcarusByNight]

As a former intimate of the biggest player, this move has been a goal of the big boys for a very long time, 27 years. Going global reduces the exposure of any consequence our country's regulatory system can or will impose.

Why should this acquisition come as a surprise? There are plans in play to merge Mexico, Canada and The US into one borderless land mass and one currency?

The new world order is now manifest.

 

[hughb]

Whatever happened to the Nasdaq/Amex merger?

--------------------------------------------------------------------------------

March 16, 1998
Pitfalls Loom in Possible Merger of Two Exchanges
By SAUL HANSELL
The announcement of the prospective merger of the American Stock Exchange and the Nasdaq stock market makes it sound so alluring.

The deal will ''combine the best features of the Amex's auction market and N.A.S.D.'s electronic market,'' an Amex statement said. Proponents tick off myriad benefits: The smaller American exchange would gain technological expertise and cost efficiency. And the National Association of Securities Dealers, Nasdaq's parent, could build share in the lucrative options market.

But on closer examination the two exchanges are so different, and so entrenched in their ways, that many of these benefits will be very difficult to achieve without substantial risk to both of their existing markets.

With the computer systems at the American Exchange so intertwined with the New York Stock Exchange, experts say, there would be few benefits and many potential pitfalls were Nasdaq to try to switch the Amex to its own computer system. And the prospect of tinkering with either market mechanism is potentially fraught with peril.

Indeed, the London Stock Exchange recently has been switching from a system modeled on Nasdaq to one more like the Amex, and the early results have been very disappointing to many investors.

It is still not exactly clear what impact the merger, which has still not been formally agreed to, will have on the existing exchanges. At first both the Amex, which operates from a trading floor in lower Manhattan, and the Nasdaq, which trades through a computer network and telephone lines, will stay separate. But over time, the markets may be linked more closely or even merged in some form.

The trend around the world, after all, is for stock exchanges to close their traditional trading floors and to move to fully computerized systems. The Toronto Stock Exchange turned the lights off on its floor last May. In other countries, like Germany, various regional exchanges are merging into bigger entities.

''We have too many markets,'' said Wayne H. Wagner, president of the Plexus Group, a consulting firm that helps big investors lower their trading costs. ''We will see more markets close their floors and more markets close their doors.''

To compete with electronic markets, the New York Stock Exchange is giving traders on its floors all manner of hand-held computer and communication devices. ''The typical broker on the floor is starting to look like a space cadet,'' said Greg Kipnis, a pioneer in electronic trading now running Invictus Partners, an investment fund. ''The N.Y.S.E. is doing a great job to increase the capacity of their human system.''

Trading experts say that Nasdaq may choose to close Amex's stock trading floor rather than keeping up with that space race. (It may have to invest in more technology for the options trading floor to compete with the Chicago Board Options Exchange, which has won business with its high-technology trading pits.)

In any case, the potential savings from combining the Amex and the Nasdaq is one of the principal motivations for the deal. ''What everyone is focused on is the huge amount of costs involved in running these marketplaces,'' said Bernard L. Madoff, the founder of a brokerage firm that bears his name.

Yet such savings may be much harder to realize than the Nasdaq hopes, trading experts say. Most of the core computers that run the Amex are part of the Securities Industry Automation Corporation, an organization owned two-thirds by the New York exchange and one-third by the American.

While fights between the two Wall Street neighbors over the years have resulted in increasingly separate systems, with the equivalent of red lines being drawn down the middle of the computer room, many parts of S.I.A.C. are still shared. The exchanges are in fact bound together by a shared data network.

Moving the operations of the Amex to Nasdaq's computers, in Trumbull, Conn., would involve complex negotiations with the Big Board, cost a lot of money, and force brokerage firms to reprogram their computers to change the way Amex orders are handled.

''There are not a lot of obvious cost savings if the Amex moves to the Nasdaq system,'' said Brad M. Friedlander, a principal with Arthur D. Little, who has provided consulting services to the New York exchange and to S.I.A.C.

An even more difficult problem, perhaps, is the potential that the trading approaches of the two exchanges would be merged. Traditionally, markets that used an auction system, like both the New York and American exchanges, have been seen as diametric opposites to collections of dealers like Nasdaq.

In auction markets, all the orders to trade in a given stock meet in one location on its trading floor. Often a buy order from one customer is matched directly with a sell order from another. A trader known as a specialist trades with a customer only if there is no ready other side for a trade.

On Nasdaq, all trades are sent to one of several dealers, who buy and sell out of their inventory. A computerized bulletin board system enables comparison shopping by posting the prices of all the competing dealers.

In theory, the auction markets have been seen as better for customers because they often eliminate the middleman and concentrate all the shares for sale in one spot. In practice, the lines between the two trading systems have been blurring for years. In particular, the Securities and Exchange Commission has forced Nasdaq to create systems for limit orders -- those which specify a price -- that let customers buy and sell from each other without trading with dealers.

''The auction market, even New York, has a lot more dealer involvement than it did, and Nasdaq has a lot more auction aspects,'' Mr. Madoff said. ''The market of the future will be a hybrid.''

Yet London's attempt to create such a hybrid has resulted in a system that has alienated many British investors. In the so-called Big Bang in 1986, London closed its trading floor and moved to a system modeled after Nasdaq, in which investors were required to buy and sell from dealers. In an attempt to create fairer prices for all investors, the London exchange last fall introduced a system in which orders are entered into a computerized auction so investors who want to buy and sell can have their trades matched up.

Yet the rules allowed brokerage firms to ignore the auction if they wanted to. So a big dealer could sell a stock to a client, say at $:3, even when someone had entered a limit order into the computer to sell the same company's shares at $:2.95. As a result, investors have found that orders using the computerized system make them pay too much for shares they want to buy and receive too little when they sell. Now 70 percent of the trading is bypassing the new auction system.

''London has designed perhaps the worst limit order book in the world,'' said Eric K. Clemons, a professor at the Wharton School of the University of Pennsylvania, who has provided consulting services to the London exchange. The reason it works so badly, he said, is that it is meant to preserve the profits of the large firms that deal in stocks rather than those of the customers. That is exactly the criticism that has been leveled over the years at Nasdaq.

As the Nasdaq now debates whether to complete this merger and then how to carry it out, seemingly minor rules, like those adopted in London, will have a great effect on how well any combination of an auction and a dealer market will serve all customers rather than just a handful of dealers.

''Some of these things,'' Mr. Madoff said, ''could gore a little bit of everybody's ox.''


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