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ICE purchase of New York Stock Exchange reflects changing times

8:07 AM, Dec 21, 2012   |    comments
The New York Stock Exchange. File.(Photo: Stephen Chernin, Getty Images)
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NEW YORK -- The parent company of the two-century-old New York Stock Exchange, best known for its stock trading business and iconic trading floor, has been acquired for $8.2 billion by InterContintenalExchange, a 12-year-old upstart that specializes in commodities, futures and derivatives trading.

The deal marks the latest chapter in the quickly changing and increasingly global exchange business. The business of buying and selling securities has been revolutionized in the past decade by tech innovations that have reduced the need for human traders, sped up trade executions to milliseconds and paved the way for the creation of ever-sophisticated trading strategies.

While ICE is a rising star in the exchange world, it said it will operate dual headquarters in Atlanta and New York, and stressed that it has no current plans to shut down the NYSE's famous trading floor, a move cheered by U.S. Sen. Charles Schumer (D-NY). "They have assured me they will keep the floor open," said Schumer. "I am pleased they will keep the New York Stock Exchange name and protect the brand."

ICE is acquiring the NYSE's parent NYSE Euronext for $33.12 a share, 38% above Wednesday's close. Shares closed Thursday at $32.25. ICE shares rose $1.79 to $130.10.

The deal marries NYSE Euronext's global stock and derivatives franchises with ICE's global clearing house business and its commodity and derivatives exchanges. ICE's futures trading business includes commodities ranging from coffee to coal and crude oil to currencies. The merger will result in an estimated earnings bump of 15% in year one. The deal is expected to close next year pending regulatory approval. ICE estimates $450 million in cost savings in year two, as redundancies are eliminated, which is key given reduced trading volumes and higher regulatory costs.

THE PRESS RELEASE: Details of the deal

IT HAD A NICE RUN: NYSE history

CHANCE OF APPROVAL: Better this time

THE MAN BEHIND THE DEAL: Jeffrey Sprecher

"This transaction leverages the strength of our iconic brand," said Duncan Niederauer, CEO of NYSE Euronext. "We are bringing together two highly complementary businesses."

USA Today

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