Wall Street banks, e-trading firms acquire majority stake in NSX

Wall Street banks, e-trading firms acquire majority stake in NSX

The all-electronic National Stock Exchange (NSX) has confirmed that Wall Street banks Bear Stearns, Citigroup, Credit Suisse and Merrill Lynch, along with e-trading firms Bloomberg and Knight Capital, have acquired a majority equity stake in its business.

The deal follows reports last month that the NSX was in talks with the bank and e-trading firms about selling a stake in its business. Each firm was expected to take a 10% stake in NSX for around $5 million apiece.

In today's statement, NSX says each investors separately acquired a minority equity stake, which amounts in aggregate to just over 50% of the voting stock of its parent company NSX Holdings.

However, although the transaction closed yesterday, financial terms of the acquisitions still haven't been released. But according to press reports the firms paid around $25 million for the controlling stake.

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.

The deal follows a number of other 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).

Commenting on the most recent investment, NSX CEO and president David Colker, says: "Concerns about cost and service due to industry consolidation have triggered strong demand for a high-tech, low-cost alternative and NSX is positioned to assume that role."

Colker says anticipating this rising demand, over the last year Chicago-based NSX has fully demutualised into a for-profit holding company structure, and built a new proprietary technology platform, called NSX Blade.

NSX says the platform will offer speed, strict price-time priority and highly competitive exchange pricing. In addition NSX will provide an order delivery function in NSX Blade, as well as an NASD/NSX trade reporting facility.

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