XPOs creating excitement at PHLX? You bet that they are!
Firms mull Philly Stock Exchange stake
By Greg Morcroft, MarketWatch
Last Update: 8:07 AM ET July 12, 2005
NEW YORK (MarketWatch) -- Four financial services firms are considering taking a stake in the Philadelphia Stock Exchange amid dramatic changes in the way stocks are traded in the U.S., a published report said Tuesday.
The Wall Street Journal, citing people familiar with the matter, said Citigroup (C: news, chart, profile) , Credit Suisse First Boston (CSR: news, chart, profile) , Morgan Stanley (MWD: news, chart, profile) and UBS (UBS: news, chart, profile) have all had discussions with the Exchange. Read Wall Street Journal story.
The report said the firms are mulling the investments for several reasons, including the concern that NASDAQ (NDAQ: news, chart, profile) and the New York Stock Exchange may raise trading fees when each closes current deals with Instinet (INGP: news, chart, profile) and Archipelago (AX: news, chart, profile) respectively.
The report also said the firms may be interested in the stakes hoping to profit from further consolidation in the sector.
Last month, press reports said that Merrill Lynch & Co. (MER: news, chart, profile) and the Citadel Investment Group's derivatives unit are each buying a 10% stake in the Philadelphia Stock Exchange, which trades stocks and options.
The consolidation has been sparked by Regulation NMS, which was recently adopted by the Securities and Exchange Commission. A key component of the regulation is the "trade-through" rule, under which an investor gets the best price for a trade no matter which market executes an order.
Executives from major exchanges, and supporters of the regulation believe NMS and planned mergers will enhance competition among markets and deliver benefits to investors.
The NYSE on April 20 announced a plan to merge with Archipelago Holdings in a deal that would move the NYSE from a not-for-profit company into a for-profit public company called NYSE Group Inc.
Days later, NYSE rival The NASDAQ Stock Market Inc. said it would buy electronic communications network Instinet Group for $1.88 billion.
And recently, much talk has shifted to the likelihood of a deal between the Chicago Mercantile Exchange (CME: news, chart, profile) and the Chicago Board of Trade, both big options markets.
The deals come amid a rapidly changing landscape for stock trading in the U.S. financial markets. So-called ECNs such as ArcaEx, Nasdaq Stock Market and Instinet have fiercely battled to divvy up the trading-volume pie. They've been successful in developing technology that's offered the kind of execution, including speed and anonymity that appealed to the growing number of big, institutional traders.
Greg Morcroft is New York news editor of MarketWatch.
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