Boston Stock Exchange sold to Nasdaq in $61m agreement

statler

statler

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I know Boston still has a lot going for it but it is things like this that edge it ever so slightly closer to the "New York's biggest suburb" title. :(

The Globe said:
Lack of volume brings end to financial chapter
Boston Stock Exchange sold to Nasdaq in $61m agreement

By Robert Gavin, Globe Staff | October 3, 2007

Nearly two centuries of stock trading in Boston will come to an end as the Boston Stock Exchange yesterday agreed to be acquired, and ultimately consolidated, by Nasdaq Stock Market Inc.

Nasdaq will pay $38 million cash and assume $23 million in debt to buy the 173-year-old exchange, which struggled in recent years to find a place in a globalized financial system increasingly dominated by big players. As global competition drove down transaction fees, Boston, one of several regional stock exchanges, couldn't generate the volume of trades needed to remain profitable, analysts said.

The Boston Stock Exchange lost nearly $3 million last year. Last month, it shuttered its two-year-old electronic trading market after it failed to attract enough business. In August, it handled less than a half-percent of approximately 7.5 billion daily US stock transactions.

"Though it is a sad moment" for the exchange, said Michael J. Curran, the exchange's chairman and chief executive, "we are not immune to the global consolidation that is occurring in the industry."

Other regional exchanges in places such as Philadelphia, Chicago, and Cincinnati, could face similar futures, said Brad Bailey, senior analyst at Aite Group, a Boston consulting firm specializing in financial services. Recent regulatory changes allowing regional exchanges to operate nationally have boosted trading volumes, Bailey said, but it's likely only a "stay of execution."

"There is overarching globalization and consolidation," he said, "and I expect to see this continue."

The Boston Stock Exchange, the nation's third-oldest, was founded in 1834 by 13 businessmen. Today, about 65 companies own the exchange's more than 200 seats. At the high point in 2001, 100 million shares a day exchanged hands through the Boston Stock Exchange.

In recent years, the exchange largely provided an alternative to the New York Stock Exchange for the area's mutual fund companies. Fidelity Investments and three Wall Street brokerage houses invested $20 million to help develop the unsuccessful electronic platform. On average, its electronic trading system handled about 5 million to 10 million shares a day.

Curran said innovation was long the hallmark of the exchange, from its early investments in western railroads in the 19th century, to adopting new technology that allowed remote trading. The deal with Nasdaq was "difficult because of the heritage," Curran said, "but the exchange has always had to adapt."

Nasdaq, the New York company best known for the technology firms that trade on its exchange, recently has acquired all or part of stock markets in Dubai, Sweden, and the United Kingdom. Nasdaq will shut down the Boston Stock Exchange at 100 Franklin St. in the Financial District and consolidate operations in New York. About 20 employees will lose their jobs.

Nasdaq also is acquiring the Boston exchange's regulatory arm, which oversees the Boston Options Exchange and employs about 25. That will remain in Boston, exchange officials said.

The options exchange, opened in 2004, was not included in the deal with Nasdaq. The Boston Stock Exchange is currently in talks to sell its 21 percent options exchange stake to Montreal Exchange Inc., which would boost its holdings in the options exchange to 53 percent.

Nasdaq's deal is expected to close in early 2008, subject to approval by the Securities and Exchange Commission. In addition to another trading venue, Nasdaq gains a clearing license, which will allow it to settle trades made on its exchange. Clearing is the process that allows buyers and sellers to actually exchange money and shares, and Nasdaq now pays a third party about $14 million a year to clear its transactions.

The acquisition of another Boston Stock Exchange license will allow Nasdaq, which lists stocks with four- and five-letter symbols, to offer companies shorter ones. That could make it easier for Nasdaq to lure companies listed on the rival New York Stock Exchange, where symbols are one to three letters. These firms could list on Nasdaq without changing their symbols, analysts said.

"We're taking these assets and moving them forward," said Nasdaq chief financial officer David Warren in a call with reporters. "Boston has a long tradition, and certainly, we're moving it forward to a stronger platform."

Robert Gavin can be reached at rgavin@globe.com.
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From what I've seen of the place (I've been in the lobby, separated from the trading floor by just some plate glass, but never actually in the room) there's no more than a dozen guys working at once, and they all look utterly calm. I know that modern technology has all but elminated the need for shouting out your orders and the like a la Wall Street, but the Boston Stock Exchange seems utterly sedated.

Then again I'm no securities trader so what do I know.
 
The NYSE is one of very few stock exchanges in the world that are still like that...and it's kept that way for nostalgic reasons.

The Hong Kong exchange is so neat and quiet you could see and hear a dropped pin:

28london.600.jpg


The BSE wasn't worth much, but it gave the city some measure of financial prestige. If it helps, Boston is still a bit more autonomous than Jersey City...
 
It's more Philly I'm concerned with.

Oh well, according to the article they will probably lose their exchange soon as well.
I seriously doubt Chicago's is going anywhere any time soon.

Still the loss of any 173 year old institution is bad for the city at some level. :(
 
Chicago's Mercantile Exchange and Board of Trade merged, which has resulted in its becoming an exchange center on par with places like Hong Kong, actually. It's a much more competitive city globally than Philly or Boston.

Of course, all this frenzied merger activity is happening because London is outpacing everywhere and making even New York panic.
 
Meh, no big deal. I mean, is there really a need for brick-and-mortar exchanges anymore? Electronic trading now encompasses a vast volume of trading activity, and the specialist system that the Big Board uses is now antiquated. The NYSE and other exchanges still exist only because of resistance to do away with the system.

Boston's financial strengths lie within asset management, and I don't see that changing any time soon.
 
The city does lose something here, but we still have the companies like Fidelity. We need to attract more banks and the like to the city. Biotech and banks, it'll work well. Lots of money to be invested in expensive nano-tech cancer curing projects that will make the city famous. Plus all the universities with their smarty biology majors and such.
 
When it goes, the people on this board will surely plea "don't worry, we still have Wellington Management..."

and so on.
 
True. The only thing in this city that irritates me more than its smug provincialism is its fatuous complacency.
 
It's kind of sad to see the BSE shuttered and a For Lease sign stuck to the side of the building.
 
Well, at least Philly is going down with us. Sort of. They get to keep their exchange.
WSJ.com said:
Nasdaq to Acquire Phil-Ex for $652 Million
By KATHY SHWIFF
November 7, 2007 8:32 a.m.

Nasdaq Stock Market Inc. will pay $652 million to buy the Philadelphia Stock Exchange, making its first big leap into the U.S. derivatives-trading business.

Nasdaq said the addition of the Philadelphia exchange, the third-largest options market in the U.S. and the nation's oldest stock exchange, would make it the third-largest options market in the U.S. The deal, expected to close in the first quarter, will add to Nasdaq's earnings in 2009.

In addition to the options market, Nasdaq will acquire a futures market operated by the Philadelphia Board of Trade and the Stock Clearing Corporation of Philadelphia.

"This strategic combination achieves our goal of diversifying our product and service offerings with attractive benefits to our trading clients while generating strong financial returns," said Nasdaq Chief Executive Bob Greifeld.

The combination, which has been the subject of talks for months, is the latest move by Mr. Greifeld to expand Nasdaq's businesses beyond the trading of U.S. stocks and the listing of well-known companies like Microsoft Corp., Intel Corp. and Starbucks Corp.

Nasdaq plans to keep the Philadelphia exchange's market structure, continuing to operate the electronic options trading platform alongside the options-trading floor in Philadelphia.

Nasdaq also announced plans recently to buy the Boston Stock Exchange, while it is planning a bigger merger with Europe's OMX AB, which will also make the Middle East's Borse Dubai a minority owner of the combined Nasdaq OMX.

The Philadelphia exchange, founded two years before the New York Stock Exchange in 1790, has floundered in trading stocks in recent years but built a strong franchise with relatively sophisticated technology for trading options. Phil-Ex increased market share for several years under CEO Meyer "Sandy" Frucher, in large part because a group of brokerage firms started sending more orders to Philadelphia after buying a stake in the company.

The exchange is majority-owned by five Wall Street firms -- units of Citigroup Inc., Credit Suisse Group, Merrill Lynch & Co., Morgan Stanley and UBS AG -- and Citadel, a Chicago-based hedge fund. Citadel, Merrill and Morgan Stanley have the largest stakes.

The Philadelphia exchange had a pretax gain of $8.9 million in 2006, reversing a $14.9 million loss the previous year. It has a market share of about 14% in options trading. In addition to options on individual stocks, Philadelphia also lists index options, stocks and currency products.

Sales talks had been conducted on-and-off with Nasdaq, its rival NYSE Euronext (the owner of the New York Stock Exchange) and other parties. Negotiations have taken place for more than a year, a period in which the sales price rose. Options tend to increase in popularity in the kind of markets that have characterized trading this year.

--Aaron Lucchetti and Jed Horowitz contributed to this article.
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Philadelphia should not be compared to Boston in terms of anything other than population. Boston isn't that bad off, and probably never will be.
 
Yes, it sad to see the BSE go finally into the night -- although when they fa?ade-ectomized the old BSE building on State Street for that ugly tower - -it was already going .. going ....

Even the Exchanges that apparently are electronic are really just new-mode dinosaurs

The future is E-bay like trading of individual securities, exchange traded funds and things yet to see the light of day by individuals, pension fund managers, hedgers and others yet to see the light of day

In fact we are inexorably headed to a truly virtual world for securities, movies, music, documents. There is no longer any justification whatsoever -- for paper or any other physical object changing hands locally or being transported any distance or for anything other than bits moving for those things that ultimately are bits or can be translated into bits from numbers, letters, characters, pictures, sounds. Ok -- there are a few exceptions -- as I?d still prefer the Renoir hanging on my wall to a digital image of it on my Iphone while I?m riding the T.

Anyway -- The Boston Area is one of a few major centers for the development and implementation of the technology behind and underpinning all the above

The rest of the other cities and their institutions are just pretenders, museums or dinosaurs who don't realize that it will be dark soon -- and we mammals will crepe out from our holes and then we will eat all the dinosaurs eggs

Dinosaurs try to remember that??.the mammals are coming and coming and ....coming ....and??



Westy
 
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