NYSE makes impressive trading debut

New York Stock Exchange, the world's largest and best known stock exchange, began life as a publicly traded company yesterday. The newly- created NYSE Group Inc, formed by the merger of the NYSE with electronic stock exchange Archipelago, was formally listed on the NYSE yesterday.

The stock opened at $67 and saw a high of $80.5 per share before closing at $80. At the closing price, the company is valued at over $12.5 billion. In comparison, NASDAQ has a market capitalisation of around $3.5 billion.

NYSE was formed more than two centuries ago by a group of individuals and played a pivotal role in the development of Wall Street as a financial nerve centre. The organisation remained a not-for-profit, privately held entity all these years - even after its corporatisation in the early '70s.

Around 2700 companies are now listed on the NYSE which still retains the open outcry system inside a trading hall. To justify the continuation of the system, the exchange says most of the listed stocks are not liquid enough and need specialists - brokers who offer market making - on the trading floor.

However, the exchange has been facing severe competition from new exchanges offering electronic trading. Electronic exchanges have grabbed a considerable part of the increase in trading volumes. Besides, the NYSE has been very slow in offering products like options and fixed income securities.

Last year the NYSE announced the merger with Archipelago, a decade-old stock exchange which offers completely electronic trading. It was decided that both NYSE and Archipelago would retain separate entities as subsidiaries of NYSE Group Inc.

The merger and subsequent listing of the NYSE group is seen as part of a long term strategy to move into overseas markets as well. Major consolidation moves among stock exchanges are happening in Europe, a trend which is expected to soon spread to emerging markets in Asia.

The 1,366 members of the NYSE have a 70-per cent stake in the merged entity while Archipelago shareholders own the rest. Each NYSE member received 80,177 equity shares in the merged company besides $370,000 in cash.

One-third of the total shares issued to NYSE members are expected to be offered for sale in a secondary offering within the next few months. The balance shares have a lock-in period of more than a year.