On a sequential basis, for the fourth quarter of 2005, Archipelago reported a net loss of $(7.6) million, or $(0.17) per diluted share, down from net income of $7.8 million, or $0.16 per diluted share, for the third quarter of 2005.

Fourth quarter results included the results of operations of PCX Holdings, Inc. (PCX), acquired by Archipelago at the end of September 2005. Also included are certain merger related costs for the companies proposed merger with the New York Stock Exchange (NYSE) consisting of:

$28.8 million of compensation expense incurred as a result of the acceleration of certain payments and vesting to our executive officers that would have occurred in 2006 following the termination of employment agreements or change in control severance agreements after the completion of our proposed merger with the NYSE,

$2.9 million of legal and other fees incurred directly in connection with the NYSE merger, and

$3.0 million of legal fees incurred in monitoring litigation matters involving NYSE and certain of its members.

Excluding the $34.7 million of NYSE merger costs and related executive compensation, the net income for the fourth quarter of 2005 would have been $13.1 million, or $0.28 per diluted share. A full reconciliation of these items is included in the attached table entitled "Reconciliation of non-GAAP financial measures to GAAP measures."

In connection with Archipelago's September 2005 acquisition of PCX, the Securities and Exchange Commission entered an order under which Archipelago undertook to divest its introducing broker, Wave Securities. Accordingly, the results of operations and financial condition of Wave Securities are presented as discontinued. To allow for accurate financial performance comparisons, all historical periods have been conformed to this presentation.

On January 23, 2006, Archipelago announced that it sold Wave Securities to Merrill Lynch & Co., Inc.

Full-Year Results

Total revenues for the year ended December 31, 2005 were $493.4 million, up from $491.3 million in 2004. Net income was $16.3 million compared to net income attributable to common stockholders of $59.3 million in 2004. Diluted earnings per share for 2005 totaled $0.34 versus $1.38 in 2004. Excluding the $46.1 million of NYSE merger costs and related executive compensation, the net income for the year ended December 31, 2005 would have been $42.9 million, or $0.90 per diluted share.

Jerry Putnam, Chairman and CEO of Archipelago, commented, "We began 2005 with our announced acquisition of the Pacific Exchange and quickly followed up with our planned merger with the New York Stock Exchange. We focused on diversifying our business and making continued improvements to our existing services. As a result, we are well positioned today to meet the changing needs of the evolving marketplace and our transformation to the NYSE Group."

Fourth Quarter Financial Highlights

Total revenues for the fourth quarter of 2005 were $136.9 million as compared to $114.1 million for the third quarter of 2005 and $128.2 million for the fourth quarter of 2004.

Cost of revenues declined $4.0 million to $71.3 million for the fourth quarter of 2005 from $75.3 million for the same period in 2004.

Gross margin increased to $65.6 million for the fourth quarter of 2005 from $53.0 million for the fourth quarter of 2004, representing an increase of $12.6 million, or 23.8%. As a percentage of total revenues, gross margin increased to 47.9% for the fourth quarter of 2005 from 41.3% for the fourth quarter of 2004.

Indirect expenses increased to $80.1 million for the fourth quarter of 2005 from $35.5 million in the fourth quarter of 2004. This increase was primarily due to NYSE merger costs and related executive compensation as well as increased employee compensation and benefits.

For the fourth quarter of 2005, the operations of PCX contributed $16.8 million to total revenues and $4.5 million to operating income.

As of December 31, 2005, the continuing operations of Archipelago had $134.4 million of cash and cash equivalents and no long-term debt.

Fourth Quarter Business and Volume Highlights

Clients executed 38.3 billion shares or 14.0% of total U.S. equity securities on ArcaEx during the fourth quarter of 2005 compared to 36.2 billion shares or 13.9% in the fourth quarter a year ago.

ArcaEx market share decreased to 22.3% in Nasdaq-listed stocks from 23.0% in the third quarter of 2005 and 23.7% from the fourth quarter of 2004.

ArcaEx market share increased to 4.8% in NYSE-listed stocks from 3.7% in the third quarter of 2005 and 2.3% from the fourth quarter of 2004.

ArcaEx market share increased to 32.8% in AMEX-listed stocks from 30.8% in the third quarter of 2005 and up from 25.6% from the fourth quarter of 2004.

The internal match rate rose slightly to 89.2% on ArcaEx compared to an internal match rate of 88.8% in the third quarter of 2005 and 87.4% in the fourth quarter a year ago.

Fourth Quarter Business Highlights

ArcaEx announced plans to launch a corporate bond trading platform that would allow users of ArcaEx to trade certain bonds listed on, or issued by companies listed by (US) markets and exchanges, through unlisted trading privileges pending SEC approval.

Archipelago announced plans for the development of a next generation options trading platform replacing the PCX Plus trading system, designed to offer significant improvements in trading system performance, functionality and reliability.

Archipelago shareholders approved its merger with the NYSE.