At 5.30am Australian time this morning the New York Stock Exchange
revealed a dramatic transformation through a merger with electronic
trading outfit
Achipelago that will see it become a for-profit listed company and
fully embrace the
electronic era. The out-moded dinosaur, which still has a trading floor
and deals in fractions, is merging with a company that was founded only
eight years ago. Check out the Reuters coverage here.

How will the NYSE seat holders respond to this? Former ASX chairman
Laurie Cox failed in his first attempt to demutualise the Australian
market and it wasn’t until his successor, Maurice Newman, came back
with an obscenely generous offer 10 years ago that the 606 members
voted in favour.

Unlike the ASX, the merged and listed NYSE Group is promising a
completely independent regulatory division with its own board to
maintain market integrity. As the ASX ran around gouging its customers
and delivering almost 200-fold returns for its lucky members, who paid
just $25,000 for 626,000 shares, it claimed to no longer be a
regulator. What rubbish.

Australia blazed the trail but there are now other examples of publicly
listed stock exchanges in Chicago, Frankfurt, Toronto and London as
well as the NASDAQ, but none of them have delivered the sort of
monopoly returns available to the stockbrokers club Down Under. The old single product NYSE will own 70% of the combined group
and is hoping the merger will allow it to broaden its product range
into derivatives, bonds and all sorts of other financial instruments.

This was resisted for years by Dick Grasso, the former NYSE chairman
who disgraced himself by trying to walk out with a $100 million-plus
retirement package in 2003. There’s clearly good money in stock
exchanges, it just depends how the spoils are divided up.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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