NYSE to Sell Stake in Amex Options Unit to Brokers

By Jeff Kearns and Nandini Sukumar

Sept. 9 (Bloomberg) -- NYSE Euronext agreed to sell stakes in the options business it purchased last year with the American Stock Exchange to seven brokerages including Bank of America Corp. and Barclays Plc, as it seeks to revive the division.

Citadel Investment Group LLC, Goldman Sachs Group Inc., TD Ameritrade Holding Corp., Citigroup Inc. and UBS AG will also buy stakes in NYSE Amex, the company said in a Business Wire statement today. NYSE Euronext will remain the biggest shareholder in the options exchange after the transaction, which is expected to close by the end of 2009, the company said.

In selling a stake to its biggest customers, NYSE is following a strategy pioneered by rivals such as Direct Edge Holdings LLC and Bats Global Markets, which are vying to become the U.S.’s third-largest equity exchange. In Europe, broker- owned trading systems including Turquoise and Chi-X Europe Ltd. have taken about a third of market share from traditional bourses such as London Stock Exchange Group Plc and Deutsche Boerse AG.

“Gone are the days an exchange could go it alone,” said Mamoun Tazi, European exchange analyst at MF Global Ltd. “Now they need their users and shareholders to be the same people. That relationship broke down when exchanges all went public. Now they are conceding defeat.”

Market Share

Once the nation’s second-largest options exchange, NYSE Amex has lost market share for eight straight years, to 5.8 percent in 2008 from 28.6 percent in 2000, according to data compiled by Options Clearing Corp. The proportion climbed to 5.9 percent in 2009. NYSE spent $260 million buying Amex in 2008.

The $1.9 trillion U.S. options market is growing faster than that for equities, where NYSE Euronext’s 217-year-old New York Stock Exchange has the largest share of business. The number of options changing hands doubled between 2005 and 2008.

The New York-based company also owns NYSE Arca, which has handled 11 percent of U.S. equity derivatives trading in 2009 and London-based Liffe, Europe’s second-largest futures market.

NYSE Euronext will continue to manage the daily operations of NYSE Amex, which would have its own chief executive officer and board of directors, according to the statement. Financial terms weren’t disclosed.

Selling stakes to customers “is certainly a trend but this isn’t a requirement for an exchange to be successful,” Gary Katz, CEO of rival New York-based International Securities Exchange, said in an interview at an industry conference in Interlaken, Switzerland today. “There are many examples of consortiums that haven’t worked. There is no guarantee of success. Only time will tell.”

Katz, who sold 49 percent of the ISE Stock Exchange to 11 companies to drive growth, said the bourse decided to fold that business into Direct Edge after drawing less than 2 percent of market share. ISE is the second-largest options bourse behind the Chicago Board Options Exchange.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Nandini Sukumar in Interlaken, Switzerland at nsukumar@bloomberg.net.