NYSE Euronext acquired American Stock Exchange (Amex) in 2008 to
expand its equities, options and exchange traded funds (ETFs)
trading business. Recently NYSE announced its plans to sell the
majority of its stake in the Amex stock options market to seven
companies which includes top banks, trading houses and brokerages.
With this move, the company hopes to increase its trading volumes
by giving major brokerages an incentive to bring their business to
Amex. Major competitors are
), BATS Global and Direct Edge.
NYSE provides the trading platform and services for trade
execution of stocks listed on its exchanges - NYSE, NYSE Arca, NYSE
Amex - as well as for orders that are routed to other market
centers for execution.
We have a price estimate of
$34.77 on NYSE Euronext's stock
prior to the acquisition bids from Deutsche Boerse and Nasdaq /
ICE's joint bid.
Under the proposed plan to dilute 52.8% NYSE Euronext's holding
of Amex, Citadel and Goldman Sachs (
) will each own nearly 15% followed by Bank of America (
), Citigroup (
) and Ameritrade (AMTD) at 5% each. UBS (UBS) will have 4.9% and
Barclays (BCS) at 3%.
NYSE Aims to Grow its Share of U.S. Listed
NYSE Euronext's share of the U.S. listed options contract
increased from 19.8% in 2009 to 25% last year. The majority of this
growth came from NYSE Amex whose share of total U.S. options market
increased from 6.9% in 2009 to 11.3% in 2010..
The association with brokerage houses and banks will definitely
benefit NYSE Amex. Citadel is both a large client that trades in
options extensively, and it has a a brokerage unit as well. By
owning 15% of this platform, Citadel would have more of an
incentive to trade via Amex. Similarly Goldman Sachs trades heavily
in options as well and could direct significant volume to Amex.
Presumably this is a reason that these two firms have larger stakes
than other banks.
We currently estimate that NYSE's market share of U.S. listed
options contracts will grow to 32% by the end of our forecast
period though this will trade dramatically if and when it is taken
See our full analysis for NYSE.