The American Stock Exchange (Amex) became the latest exchange to be acquired when NYSE Euronext signed an agreement to purchase it for $260 million on Jan. 17. The transaction is subject to regulatory and Amex member approval and is expected to close in the third quarter of 2008.
“The acquisition by NYSE Euronext may just be the shot in the arm that Amex needs to right its sinking ship,” says Mark Longo, founder of The Options Insider.com. “The combination of Amex’s innovative products with NYSE Euronext’s technology and financial muscle is formidable,” he says.
In a conference call, NYSE Euronext CEO Duncan Niederauer called the deal “highly beneficial for our investors and customers” and “consistent with our strategic objectives.”
One objective the deal fills is the expansion of NYSE Euronext’s options business, as it adds enough volume to make NYSE Euronext the third largest options marketplace in the United States. After the merger, NYSE Euronext will operate on a dual market structure, offering the choice of price-time priority on NYSE Arca and the Amex’s traditional market-maker model. “The Amex offers the opportunity for NYSE to offer a hybrid options market similar to the CBOE,” says Peter Bottini, executive vice president of trading at optionsXpress. “The Arca side would be fully electronic and the Amex side would favor open outcry, for larger, more sophisticated trades. The two markets could also offer two completely different fee structures, with the Arca maker-taker attracting algorithmic players such as Getco, and the Amex side favoring a more customer friendly model with free access for customers.”
Bottini notes the Amex deal was a bargain for NYSE. “Relative to the inflated prices of exchanges worldwide, the Amex comes cheap. It has a decent ETF business, which has definitely grown in popularity in recent years,” he says.
While some see bright spots, it is an anti-climactic end to one of the more innovative exchanges. Ivers Riley, who was the driving force in the creation of exchange traded funds (ETFs) when he was an executive at Amex, says ETFs could have saved Amex if they were able to gain exclusive listing of them. “I fought long and hard for years on this and could not make headway… we could not get exclusivity even though S&P wanted us to have exclusivity,” Riley says. “It was the difference between survival and non-survival for the Amex.”