NYSE goes public, shares surge

By Megan Davies

NEW YORK (Reuters) – The New York Stock Exchange began life
as a publicly traded company on Wednesday, its stock jumping as
much as 18 percent in its market debut.

It marked the end of the exchange’s 213-year history as a
members-owned club and the beginning of its membership in the
red-hot public exchange sector.

The NYSE, the world’s largest stock exchange, on Tuesday
sealed its purchase of electronic rival Archipelago Holdings
Inc. and combined the two companies into a new entity, NYSE
Group Inc., worth more than $11 billion at current market
prices.

Interest in NYSE shares was high as trading started,
mirroring other strong openings for exchanges going public. The
stock rose 18 percent to $76 in early dealings but later pulled
back to $72.41, up 11 percent from Archipelago’s close at
$64.25 on Tuesday.

“The floor reaction was great. You could hardly hear the
bell,” NYSE Chief Executive John Thain told reporters after
ringing the bell to mark the start of trading.

Commenting on investor appetite for the stock, Thain said,
“There’s a lot of interest right now, and for the long term its
for us to demonstrate that there’s real value here.”

But ringing of promotional NYSE hand bells was not quite
enough to drown out a few cries of “boo” from sections of the
trading floor, with some uncertainty overhanging the long-term
future of a human auction system as cheaper, electronic trading
takes over.

The rise in the share price came as a surprise to some
analysts who had not expected a significant ‘pop’, with the
deal factored into Archipelago shares that have surged to $65
from about $17 when the deal was unveiled last April.

“A very strong opening. It’s a testament to the work NYSE
Chief Executive John Thain has done to bring the exchange into
the 21st Century,” said Tim Ghriskey, chief investment officer
of Solaris Asset Management.

“Now it will be making acquisitions, moving into new lines
of business and trading securities of all types.”

STRONG INVESTOR INTEREST

Interest in exchanges going public has sent other exchange
shares soaring in recent market debuts.

Shares of CBOT Holdings Inc., operator of the No. 2 U.S.
commodities exchange, surged nearly 50 percent in their market
debut last October; Chicago Mercantile Exchange Holdings Inc.,
the largest U.S. futures exchange, rose nearly 23 percent from
their offer price in 2002.

Analysts are awaiting guidance on where the NYSE is headed
in order to evaluate its growth prospects.

Combining the NYSE and Archipelago in a public company is a
landmark deal that could herald in a new, more aggressive
culture for the NYSE, which had been run as a members’ club
since its formation in 1792. The NYSE is now answerable to
shareholders and analysts.

Thain said that by the end of the year he would look at the
issue of bringing the exchange’s opening forward from 9:30 a.m.
to win some of the trades happening earlier, which could boost
its market share by a couple of percentage points.

Thain, who has steered the NYSE public since joining from
Goldman Sachs in 2004, said he hoped to launch a secondary
offering of NYSE shares in the next six weeks.

This will give the NYSE’s 1,366 former seat holders — each
seat was swapped for 80,177 shares and $300,000 cash — a
chance to sell some of their shares and increase liquidity in
NYSE Group. The former seat holders’ shares represent 70
percent of the total; converted Archipelago shares represent
the other 30 percent.

Thain made no comment about whether the newly listed NYSE
Group would cut jobs and costs in order to save money, or raise
trading prices on the floor.

The Big Board is expected to take more aggressive strides
in pushing into assets other than equities. Thain has made
clear his desire to participate in the continuing consolidation
of exchanges in Europe.