Archipelago shines on NYSE merger

Floor dealing will continue, the NYSE insists

Shares in US electronic market Archipelago have rocketed 66% on news of its merger plans with the New York Stock Exchange (NYSE).

The NYSE is set to list its own shares, after 213 years of being mutually owned by its members.

Exchange members are expected to back the deal when they hold a meeting after the close of trading on Thursday.

The deal follows merger activity among other exchanges, notably a string of bids for the London Stock Exchange.

Archipelago's shares, which are traded on the Pacific Stock Exchange, rose 66% to $29.87 on Thursday.

Cheaper trading

The NYSE hopes the deal will improve its electronic trading systems, but it insists its famous "open outcry" trading floor will keep operating.

The deal will give the NYSE's 1,366 "seat holders" 70% of the new firm.

Many seat holders - who will also split some $400m (£209m) in cash - have been keen to turn the exchange into a profit-making public company, and hope it will encourage cheaper trading as a result.

The proposed new structure would split the exchange's responsibilities for regulation into a separate not-for-profit unit.

The New York Stock Exchange has just acquired this humongous competitive advantage Warren West, Greentree Brokerage Services

"This is an essential step to maintaining our global competitiveness and leadership," said NYSE chief executive John Thain.

The offer price for a membership seat has soared to more than three times the value of the previous sale on 15 April, the NYSE added.

A seat changed hands on Thursday for $1.8m, up $180,000 from April's deal.

Face to face

The NYSE's focus on floor trading - hundreds of people concentrated in a huge room on Wall Street, cutting share deals face-to-face - is a rare hold-out among the world's big exchanges.

Other US markets, in particular the tech-rich Nasdaq, have made their electronic-only model a major selling point. Nasdaq is widely thought to be on the point of buying another electronic trading platform, Instinet, from Reuters.

The NYSE was keen to stress that human trading will remain, but the deal will allow it to offer better screen-based trading as well.

Recent regulatory changes in the US are thought to favour a gradual shift away from face-to-face trading and towards electronic models.

"It's of huge significance for the industry," said Warren West, president of Greentree Brokerage Services in Philadelphia.

"The New York Stock Exchange has just acquired this humongous competitive advantage."

William Donaldson, chairman of financial regulator the Securities & Exchange Commission, said it was "a positive development for investors, illustrating just how aggressive the markets will become in competing with one another now".