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 Nasdaq OMX (NASDAQ:NDAQ), CME Group (NYSE:CME), 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 (NYSE:GS) will each own nearly 15% followed by Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Ameritrade (NYSE:AMTD) at 5% each. UBS (NYSE:UBS) will have 4.9% and Barclays (NYSE:BCS) at 3%. 
NYSE Aims to Grow its Share of U.S. Listed Options
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 over.Notes:
- NYSE Files Plan to Sell Half of Amex Options Market, March 21, 2011, Bloomberg [↩] [↩]