It's promises galore for the merger be-tween NYSE, one of the leading stock exchanges in the world, and Archipelago, an electronic trading network. For NYSE, which had been mired in controversy over the issue of corporate governance until recently and had been facing criticism for its lethargy in embracing electronic trading, the deal not only promises to change that perception, but could also give the 212-year old stock exchange the much-needed foothold in the growing electronic trading business. The merged entity will be called NYSE Group and it will be a publicly traded entity. The existing owners of NYSE will hold 70% in the new entity while the rest will be held by the shareholders of Archipelago. Valued at $400 mn, it is an all-cash deal and is expected to be closed by the end of 2005.

The merger, which promises to transform NYSE into a public for-profit entity, has been touted as an essential step by USA's largest stock exchange to maintain its global competitiveness and leadership. NYSE perhaps got the necessary impetus from the success story of Chicago Mercantile Exchange going public. According to experts, the new entity will leapfrog to the number two position in the global stock exchange ranking chart after Deutsche Borse, in terms of their stocks' market capitalization; assuming that these exchanges are listed as stocks.

Today, as capital markets across the world get integrated, companies look to raise capital where it is cheap. This phenomenon is leading to intensifying competition among stock exchanges the world over, as they vie to get a share in the global pie. Another important factor that forced NYSE to rethink its decision to stay alone was the growing competition from electronic trading networks, which have been eating into the market share of old stock exchanges in the US. The NYSE - Archilepago merger does vindicate the fact that consolidation is inevitable as far as stock exchanges are concerned.

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