US banks, e-trading firms to take stakes in National Stock Exchange

US banks, e-trading firms to take stakes in National Stock Exchange

A group of Wall Street banks, including Citigroup, Bear Stearns and Credit Suisse, is teaming with e-trading firms Bloomberg and Knight Capital to buy a 50% stake in the all-electronic National Stock Exchange (NSX), according to the Wall Street Journal (WSJ).

Founded in 1885 NSX - which was formerly known as the Cincinnati Stock Exchange - was one of the first exchanges to switch to an all-electronic operation and replaced its physical trading floor with a completely automated market in 1980.

According to the WSJ report, which cites people familiar with the negotiations, each firm is expected to take a 10% stake in the Chicago-based regional exchange and is likely to pay about $5 million for each stake. However the terms of the deal could change before an offical announcement.

The WSJ says officials from two of the parties involved with the proposed transaction confirmed the details of the deal.

The deal is the latest in a series of investments made by banks and brokers in regional US exchanges which have come about amid rising concern that the dominant exchanges in the US - Nyse and Nasdaq - could use their market power to raise trading fees.

In June, Bank of America, Bear Stearns, E*Trade Financial and Goldman Sachs made a combined $20 million equity investment in the Chicago Stock Exchange, while last year Morgan Stanley, Citigroup, UBS, Credit Suisse, Merrill Lynch and Citadel Derivatives each acquired minorty stakes in the the Philadelphia Stock Exchange (PHLX).

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