By Doris Frankel and Jonathan Spicer
CHICAGO/NEW YORK, Sept 9 (Reuters) - Exchange operator NYSE Euronext plans to sell a significant stake in its NYSE Amex options market to seven major Wall Street firms, as it bets a boost in market share will offset the partial loss of control.
Under the deal, the company has 'agreed in principle on a framework' with Citadel Securities, Goldman Sachs Group Inc , TD Ameritrade Holding Corp and others who would become partners and gain equity interest in the fifth- biggest U.S. options venue.
Observers said the move, which NYSE Euronext hopes will bring it to 25 percent market share by the year's end, could spark similar deals among rival exchanges. Combining its two AMEX and NYSE Arca platforms, NYSE Euronext accounted for 18 percent of U.S. options last month, up marginally from last year.
The company, which will retain the largest stake in AMEX, did not say how much it was willing to give up, nor did it outline the impact the tentative deal would have on revenue.
Edward Boyle, NYSE Euronext's senior vice president of U.S. options said the stake sale 'aligns us very closely with our client base,' adding 'it's not a huge stretch' to reach 25 percent with AMEX and Arca combined.
NYSE Euronext, which also runs the New York Stock Exchange, would continue to manage the day-to-day operations of AMEX after any deal with the partners, which also include Bank of America Corp, Barclays PLC, Citigroup Inc and UBS AG. But a separate board and head executive would supervise the exchange.
It expects the transaction to be completed by the end of 2009.
NYSE Euronext acquired the American Stock Exchange, now called AMEX, last year as part of a broader move into derivatives meant to offset flagging equity trading. Management repeated in July it was looking for partnerships that would put it among the options leaders, the Chicago Board Options Exchange and the International Securities Exchange.
'The CBOE, the ISE and the other exchanges are not going to sit idly either and let this happen,' said Herb Kurlan, CEO of Vtrader Pro, an online proprietary trading firm in San Francisco. 'They will try to create relationships that will solidify their order flow as well.'
The CBOE had 28 percent equity options market share in August, while the ISE, which is owned by Deutsche Boerse AG's derivatives unit Eurex, had 29 percent, according to the Options Clearing Corp.
CBOE's total market share including index options for August was 32.5 percent, ahead of ISE's total market share of 27.4 percent.
'Each exchange has their own mechanisms for aggregating liquidity -- often times it is related to membership privileges, pricing models, or market structure,' said Andy Nybo, head of derivatives at research firm TABB Group.
'Other exchanges have market makers that are equity owners as well,' Nybo added, pointing to stock venues BATS Exchange and Direct Edge.
BATS aims to launch an options market early next year, while CBOE aims to launch a second venue, which would make nine in the United States.
In 2005, the Philadelphia Stock Exchange, which trades options and is now owned by Nasdaq OMX, sold a 25 percent equity stake to four banks. A year later, six stakeholders had amassed an 89 percent stake.
Philadelphia 'succeeded to some extent but they subsequently were acquired by the Nasdaq,' said Kurlan. 'It is a good strategy to capture order flow at the exchanges where these firms make the investments.'
The old American Stock Exchange, which also traded stocks and pioneered exchange-traded funds, was once an options powerhouse. But its market share diminished steadily since 2000 as rivals ramped up technology.
In March, NYSE Euronext opened the new AMEX floor next to the Big Board and its CEO set the 25 percent combined Amex-Arca market share goal.
Net trading revenue for U.S. derivatives, of which options accounts for the vast majority, was $33 million in NYSE Euronext's latest quarter, up from $19 million a year ago.
The company's shares were up 0.4 percent on Wednesday.
(Reporting by Doris Frankel in Chicago and Jonathan Spicer in New York; additional reporting by Chakradhar Adusumilli and Ajay Kamalakaran in Bangalore, editing by Matthew Lewis) Keywords: NYSE/AMEX (doris.frankel@thomsonreuters.com; + 1 312 408 8752; Reuters Messaging: doris.frankel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
CHICAGO/NEW YORK, Sept 9 (Reuters) - Exchange operator NYSE Euronext plans to sell a significant stake in its NYSE Amex options market to seven major Wall Street firms, as it bets a boost in market share will offset the partial loss of control.
Under the deal, the company has 'agreed in principle on a framework' with Citadel Securities, Goldman Sachs Group Inc , TD Ameritrade Holding Corp and others who would become partners and gain equity interest in the fifth- biggest U.S. options venue.
Observers said the move, which NYSE Euronext hopes will bring it to 25 percent market share by the year's end, could spark similar deals among rival exchanges. Combining its two AMEX and NYSE Arca platforms, NYSE Euronext accounted for 18 percent of U.S. options last month, up marginally from last year.
The company, which will retain the largest stake in AMEX, did not say how much it was willing to give up, nor did it outline the impact the tentative deal would have on revenue.
Edward Boyle, NYSE Euronext's senior vice president of U.S. options said the stake sale 'aligns us very closely with our client base,' adding 'it's not a huge stretch' to reach 25 percent with AMEX and Arca combined.
NYSE Euronext, which also runs the New York Stock Exchange, would continue to manage the day-to-day operations of AMEX after any deal with the partners, which also include Bank of America Corp, Barclays PLC, Citigroup Inc and UBS AG. But a separate board and head executive would supervise the exchange.
It expects the transaction to be completed by the end of 2009.
NYSE Euronext acquired the American Stock Exchange, now called AMEX, last year as part of a broader move into derivatives meant to offset flagging equity trading. Management repeated in July it was looking for partnerships that would put it among the options leaders, the Chicago Board Options Exchange and the International Securities Exchange.
'The CBOE, the ISE and the other exchanges are not going to sit idly either and let this happen,' said Herb Kurlan, CEO of Vtrader Pro, an online proprietary trading firm in San Francisco. 'They will try to create relationships that will solidify their order flow as well.'
The CBOE had 28 percent equity options market share in August, while the ISE, which is owned by Deutsche Boerse AG's derivatives unit Eurex, had 29 percent, according to the Options Clearing Corp.
CBOE's total market share including index options for August was 32.5 percent, ahead of ISE's total market share of 27.4 percent.
'Each exchange has their own mechanisms for aggregating liquidity -- often times it is related to membership privileges, pricing models, or market structure,' said Andy Nybo, head of derivatives at research firm TABB Group.
'Other exchanges have market makers that are equity owners as well,' Nybo added, pointing to stock venues BATS Exchange and Direct Edge.
BATS aims to launch an options market early next year, while CBOE aims to launch a second venue, which would make nine in the United States.
In 2005, the Philadelphia Stock Exchange, which trades options and is now owned by Nasdaq OMX, sold a 25 percent equity stake to four banks. A year later, six stakeholders had amassed an 89 percent stake.
Philadelphia 'succeeded to some extent but they subsequently were acquired by the Nasdaq,' said Kurlan. 'It is a good strategy to capture order flow at the exchanges where these firms make the investments.'
The old American Stock Exchange, which also traded stocks and pioneered exchange-traded funds, was once an options powerhouse. But its market share diminished steadily since 2000 as rivals ramped up technology.
In March, NYSE Euronext opened the new AMEX floor next to the Big Board and its CEO set the 25 percent combined Amex-Arca market share goal.
Net trading revenue for U.S. derivatives, of which options accounts for the vast majority, was $33 million in NYSE Euronext's latest quarter, up from $19 million a year ago.
The company's shares were up 0.4 percent on Wednesday.
(Reporting by Doris Frankel in Chicago and Jonathan Spicer in New York; additional reporting by Chakradhar Adusumilli and Ajay Kamalakaran in Bangalore, editing by Matthew Lewis) Keywords: NYSE/AMEX (doris.frankel@thomsonreuters.com; + 1 312 408 8752; Reuters Messaging: doris.frankel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.