PHLX pursues plan to reinvent itself
By Vincent Boland in New York
Financial Times; Jul 10, 2003
The Philadelphia stock exchange, the oldest in the US, is to demutualise and become a proper company as it seeks strategic partners to help it expand its product base and take on its competitors more effectively.
The plan does not involve a stock market listing, but it could attract the interest of non-US securities exchanges eyeing the US market. The Eurex derivatives exchange has announced plans to trade options and futures in the US and is known to be in talks with several exchanges about co-operation on such a venture.
Meyer Frucher, chairman and chief executive of the PHLX, declined to comment on what the PHLX might do after the demutualisation. But he said it was well known in the securities industry that "there are too many exchanges, and a need for consolidation".
He said the Securities and Exchange Commission had indicated that it would want to approve any single investor's owning more than 40 per cent of a securities market. But it would not oppose a change from a mutual to a corporate structure.
The PHLX is one of sev eral regional stock exchanges in the US struggling to win market share in trading listed stocks from the New York Stock Exchange.
It is also seeking to expand its options business. It has approached the Pacific Exchange about combining their options businesses - a move understood to be under consideration.
"We want to position ourselves so we can be ready to be nimble when the opportunity arises," Mr Frucher said.
The move to demutualise was "a necessary action" for the exchange, which trades stocks and options. Discussions with the SEC were ongoing, and a final plan would be put to members and seat owners at the PHLX for a vote "early in the fall".
Founded in 1790, the PHLX has 505 seats. The last one to change hands cost $15,000. The demutualisation plan involves converting the seats into shares and introducing trading permits as a means to trade on the exchange.
US securities exchanges are moving away from a member-owned structure. The Chicago Mercantile Exchange secured a stock market listing last year. The Nasdaq stock market was pursuing a full listing for its stock, which is traded on the over-the-counter bulletin board market, but backed away from that last month, saying it would instead raise the profile of the bulletin board stock.
Most exchanges elsewhere have stock market listings.
Mr Frucher said the demutualisation plan had been discussed extensively with members, who often prove the main obstacle to a change in the status of a stock exchange. "We will continue this dialogue and deliberative process as we go forward," he said. |
