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The corporate logos of the IntercontinentalExchange Inc. and the NYSE on the floor of the New York Stock Exchange. The New York Stock Exchange is being sold to the rival exchange for about $8 billion.

Richard Drew, Associated Press

Venerable NYSE sold to an upstart

  • Article by: STEVE ROTHWELL
  • Associated Press
  • December 20, 2012 - 7:39 PM

NEW YORK - The Big Board just isn't so big anymore.

In a deal that highlights the dwindling stature of what was once a centerpiece of capitalism, the New York Stock Exchange is being sold to a little-known rival for $8 billion -- $3 billion less than it would have fetched in a proposed takeover just last year.

The buyer is IntercontinentalExchange, a 12-year-old exchange based in Atlanta that deals in investing contracts known as futures.

Intercontinental Exchange, known as ICE, said Thursday that little would change for the trading floor at the corner of Wall and Broad streets, in Manhattan's financial district.

But the clout of the two-centuries-old NYSE has gradually been eroded over decades by the relentless advance of technology and regulatory changes. Its importance today is mostly symbolic.

The NYSE dates to 1792, when 24 brokers and merchants traded stocks under a buttonwood tree on Wall Street. But today most trading doesn't require face-to-face meeting at all. It's done on computers that match thousands of orders a second.

Three decades ago, the floor of the New York exchange was full of bustling traders. Today, one of its largest booths belongs to the cable news channel CNBC, which broadcasts there for most of the business day.

The introduction of negotiated, rather than fixed, commissions for securities transactions, in May 1975, marked the start of a gradual decline in brokerage fees for traditional stock trading.

It also gave rise to so-called discount brokerages, like Charles Schwab, that offered to trade for customers at lower rates.

"The cash equities business in America has effectively been obliterated," said Thomas Caldwell, chairman of Caldwell Securities in Toronto and a shareholder in the New York exchange's parent company, NYSE Euronext.

He said that the jewel of the deal is not the New York exchange but Liffe, a futures exchange founded in London, further underlining the growing importance of the futures markets.

ICE was established in May 2000. Its founding shareholders represented some of the world's largest energy companies and financial institutions, according to the company's most recent annual report.

Its stated mission was to transform the energy futures market by providing more transparency. The company has expanded through acquisitions during the last decade and went public -- on the NYSE -- in November 2005.

Analysts forecast that ICE's revenue will reach $1.4 billion this year, more than double the $574 million it reported in 2007.

"We believe the combined company will be better positioned to compete and serve customers across a broad range of asset classes by uniting our global brands, expertise and infrastructure," said ICE Chairman and CEO Jeffrey Sprecher.

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