Nasdaq deal for PHLX reported
The Philadelphia Stock Exchange, the nation's oldest, will be sold for $650 million, a knowledgeable source said.
Nasdaq Stock Market Inc. has a deal to buy the Philadelphia Stock Exchange for $650 million, according to a person with direct knowledge of the transaction.
The Philadelphia exchange, whose strength is in options trading, hired an investment bank in August to explore whether to sell or go public. It has been negotiating exclusively with Nasdaq for more than a week.
The deal is preliminary. Bloomberg News reported that the Philadelphia board had approved the sale, but Nasdaq's board still must vote on it.
Nasdaq is committed to keeping an options-trading floor in Philadelphia as long as it is economically viable, the person said.
About 300 people are active on the options-trading floor of the Philadelphia Stock Exchange, in the 1900 block of Market Street. That is down from 800 to 900 five years ago. The exchange employs 380, about 200 of them in the technology operation.
Nasdaq, which has no floor-trading operations, has been working on plans to open its own options exchange. It said during its third-quarter earnings conference call last month that it intended to do that in December.
The options industry is booming, thanks to the increasing use of options and other derivatives to boost yields and reduce risk.
The Philadelphia Stock Exchange said yesterday that its equity-option volume had jumped 59 percent from the same period a year ago, giving it 15.74 percent of all equity-options trading. It ranks third, behind the International Stock Exchange and the Chicago Board Options Exchange.
The Philadelphia exchange, the nation's oldest bourse, demutualized in January 2004, sold 89.4 percent of itself to six Wall Street trading firms for $33.75 million in 2005 and 2006, and, until recently, had been embroiled in lawsuits brought by former members.
One of those suits was settled recently in a deal that could be worth as much as $80 million, depending on how much the exchange brings in a sale.
The six trading firms, including Citadel Derivatives Group L.L.C., Merrill Lynch & Co. Inc., and Morgan Stanley, which own 89.4 percent of the Philadelphia exchange, provide about 40 percent of the options-trading volume here.
The business contributed to the huge increase in the exchange's value in recent years. In 2005, the exchange rejected a $50 million offer from Archipelago Holdings Inc., an electronic options exchange that since has become part of NYSE Euronext and has been gaining ground on Philadelphia.
Neither the Philadelphia Stock Exchange nor Nasdaq responded to requests for comment.