Dazed and Confused

NYSE to Merge With Archipelago, Be Public, For-Profit Company

April 20 (Bloomberg) -- The New York Stock Exchange, the world's largest stock market, agreed to merge with Archipelago Holdings Inc. and make the 212-year-old institution a public, for- profit company.

The NYSE's current shareholders will hold 70 percent of the merged company, with Archipelago investors holding the rest, NYSE Chief Executive Officer John Thain said at a news conference at the exchange in downtown Manhattan.

Thain has been trying to fend off challenges from the likes of Archipelago and the Nasdaq Stock Market as he fashions a plan to mesh electronic and manual trading. The NYSE's market share of trading in its own listed stocks slipped below 80 percent in November for the first time in seven months.

``The Nasdaq has been stepping on the New York's turf,'' said Dan Mathisson, head of electronic trading at Credit Suisse First Boston. ``This would allow them to get on the Nasdaq's turf.''

Membership prices at the NYSE have fallen by more than half amid concern that the heightened competition as well as proposed U.S. Securities and Exchange Commission trading rules will erode business, The latest sale of a so-called seat, on April 15, fetched $1.62 million, down from an August 1999 peak of $2.65 million.

The SEC is considering proposals aimed at enlivening competition among markets, steps that could boost Archipelago and other NYSE rivals. In the fourth quarter, Archipelago handled 2.3 percent of NYSE-listed stock trading, double that of a year earlier.

Shares of Archipelago jumped 8 percent to $18.30 as of 3:41 p.m. in Nasdaq Stock Market trading. The Wall Street Journal reported the Archipelago transaction before the close of regular trading.

Archipelago this month opened its stock-trading network four hours earlier, at 4 a.m. New York time, adding to pressure on the NYSE to allow earlier trading on the world's biggest exchange as well. The NYSE now opens at 9:30 a.m. and closes at 4 p.m.