Nybot is the world's largest marketplace for futures and options on commodities. The merger with ICE will see the exchange - which was originally established in 1870 as the New York Cotton Exchange - transform into a public company.

The transaction consideration will comprise 10.297 million shares of ICE common stock and $400 million in cash. Under this deal, Nybot members will own 15% of the compbined company following the merger.

In a similar deal last year, the member-owned New York Stock Exchange (Nyse) became a public company through a merger with electronic trading network Archipelago.

Currently Nybot is a mainly floor-based exchange with open-outcry trading. The deal with ICE will enable it to introduce electronic dealing alongside its current open-outcry trading.

Harry Falk, Nybot president and CEO, says it is essential for the future growth of the company to partner with a rapidly expanding exchange such as ICE.

"This merger provides our unique traditional markets the resources necessary to provide greater access and a higher level of service to our global users," says Falk. "It will allow us to continue using open-outcry trading, while providing a state- of-the-art electronic trading capability, thus giving our market participants a choice in how they wish to trade."

Commenting on the merger, Jeffrey Sprecher, chairman and CEO, ICE, says: "The combination of two global and rapidly growing commodity marketplaces, together with a highly respected clearinghouse, allows us to expand ICE's offerings for market participants, as well as create long-term shareholder value.

As part of the transaction Nybot members and member firms must retain 30% of the ICE stock received for each seat to remain a member with floor trading rights, and to maintain privileges and fee discounts.

The merger is expected to close in the first half of 2007.