NYSE reorganization

By:  Cydney Posner

It is anticipated that, on March 7, the NYSE will complete its acquisition of the electronic trading group, Archipelago Holdings, Inc. Rule changes necessary to complete the acquisition were approved by the SEC this week.   Following the merger, the businesses of the NYSE and Archipelago will be held under a single, publicly traded holding company, NYSE Group. The NYSE’s current businesses and assets will be held in three separate entities affiliated with NYSE Group –New York Stock Exchange LLC, NYSE Market, and NYSE Regulation. New York Stock Exchange LLC will be a direct, wholly owned subsidiary of NYSE Group and will be the successor to the registration of the NYSE as a national securities Exchange. NYSE Market and NYSE Regulation will carry out their respective responsibilities under a delegation agreement with New York Stock Exchange LLC.

The merger will have the effect of converting the NYSE from a not-for-profit entity into a for-profit, publicly traded entity and "demutualizing" the NYSE by separating equity ownership in the NYSE from trading privileges on the NYSE. That is, after the merger, there will be "members" and "member organizations" of the New York Stock Exchange LLC. However, they will be members or member organizations by virtue of their membership, not because they are equity owners of NYSE Group or any of its subsidiaries.

The WSJ is already reporting some of the changes expected to result from the merger, including a major expansion of the number of bonds traded on the NYSE exchange. The WSJ reports that the NYSE has requested SEC approval to trade any bonds issued by the nearly 2,800 companies with shares listed on its exchange, with the result that more than 5,000 bonds would become tradable on the NYSE, compared with fewer than 1,000 currently listed. According to the WSJ, the NYSE expects to receive a green light by the end of the second quarter. The bond market has historically been fragmented and rather opaque; the expansion is expected to lead to increased transparency in the way that bonds are traded by allowing investors to see bond prices before making a decision to trade.

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