Nasdaq and Amex in merger talks

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The Independent Online
MORE usually accustomed to tracking the mergers and acquisitions of the worlds' corporations - and profiting from them - Wall Street found itself distracted by the prospect of a marriage altogether closer to home yesterday.

Nasdaq and the American Stock Exchange (Amex) confirmed they were in discussions about a merger that would better equip them to take on the might of the largest of the Wall Street markets, the New York Stock Exchange (NYSE).

Details were not available, but the talks appeared to be at an advanced stage. Several obstacles remained, however. Both markets would have to persuade their own memberships to vote in favour of the union.

While a merger may offer logic in terms of challenging to the overwhelmingly dominant NYSE, it would also be one between two starkly different trading systems, histories and cultures.

The Amex dates back to the out-door curbstone brokers of the last century and only moved indoors in 1921. Like the NYSE, it still trades on a floor through "open-cry" auction. It remains best-known for energy stocks, although recently it has carved a niche in derivatives.

Nasdaq, by contrast, is young and brash. Formed in 1971 by the National Association of Securities Dealers, it trades via a computer-dealer network and has no actual trading floor. It has specialised in attracting high technology issues like Microsoft and Intel.

In a statement, Amex said a merger would "combine the best features of the Amex's auction market with NASD's electronic market".

In recent years, the Amex in particular has struggled to keep momentum. Its listings have fallen in number from 1,004, 20 years ago, to 771 at the end of last year. Moreover, while the Amex trades an average of 24 million shares a day, that compares with about half a billion for the NYSE.

In its 27 years, the Nasdaq has grown furiously and successfully built its image as home to the hi-tech stocks. It has been wounded by regulatory problems, however, and was forced in 1996 to spend $100m (pounds 61m) in upgrading its systems after an investigation into possible fraud by its brokers.

Even together, the Nasdaq and Amex will have trouble escaping the NYSE's shadow. The combined market value of the companies listed with them, for example, would total about $2 trillion. The NYSE, however, already has companies with valued together at $9.4 trillion.

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