Deals & Deal Makers: Archipelago to Set Up New Stock Market
The New York Stock Exchange, already facing pressure to modernize its trading operations, is about to get a major, fully electronic competitor.</br></br>The Archipelago trading system and the Pacific Exchange announced they are creating a new stock market. The alliance marks the first time one of the new alternative trading systems, known as ECNs, will effectively share a membership card as a traditional stock exchange.</br></br>By joining with the Pacific, Archipelago would instantly acquire the status necessary to compete with the NYSE on a level playing field.</br></br>Under the alliance, Archipelago Holdings LLC, which operates the Archipelago electronic communications network, will acquire the Pacific Exchange's struggling stock-trading business. In return, the Pacific Exchange, based in San Francisco, will become a minority shareholder in Archipelago and provide regulatory and exchange-management services to the new entity.</br></br>The plan is subject to regulatory approvals. Archipelago is one of the fast-growing screen-based trading systems that have grabbed almost a third of the Nasdaq Stock Market's volume. They have taken very little share of NYSE-listed volume, however, partly because they are technically brokers, and only stock exchanges have full access to the linkages between the venues that trade NYSE stocks.