NYSE membership now exceeds US$3m

Memberships on the New York Stock Exchange may be a bargain even after the price almost tripled this year and exceeded US$3 million for the first time.

The difference, or spread, between the cost of a so-called seat and the value of the NYSE's offer to members in connection with its proposal to go public has widened to US$1.08 million ($1.57 million) from a fourth-quarter low of US$392,000 on October 20.

By combining with Archipelago Holdings, the third-largest US electronic market, the exchange wants to become a for-profit, publicly traded company. The wider spread reflects investors' enthusiasm for the transaction, coupled with the difficulty of buying a seat on the Big Board.

"People are excited that the deal will get done and buying Archipelago stock is a backdoor way to own a piece of the New York Stock Exchange," said John Orrico, of Water Island Capital in New York.

"There is a premium on Archipelago shares because it takes days to buy a seat on the exchange."

The takeover will enable the NYSE to start trading the shares of companies listed on the Nasdaq along with options and exchange-traded funds. The combined company will have a market value of about US$7.92 billion.

Under the terms of the takeover, each Big Board member will receive 80,177 shares of the combined company, NYSE Group, and about US$300,000 in cash. They can elect to receive more stock and less cash, or vice versa. Archipelago's holders will get one share of NYSE Group for each of their shares.

The standard offer to the members puts a $4.33 million value on each seat, based on Archipelago's present price of US$50.30. The seat price has increased since a sale of a seat this week for US$3.02 million.

"If this deal doesn't go through, these Archipelago shares are probably going back to the US$17 that they came from," Orrico said.

NYSE members and Archipelago shareholders are set to vote on December 6.

The settlement permits the voting to proceed as scheduled unless the independent evaluation is unfavourable or incomplete. Antitrust regulators have approved the transaction.

"The majority want to vote and want this transaction to go through," NYSE chief executive John Thain said.

Thain said he met a group of about 40 members that had polled seat-holders about the takeover; of the 300 surveyed, 296 would approve.

- BLOOMBERG