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NYSE And Rebels Agree To Review Archipelago Deal

by Glen Shapiro,, New York

17 November 2005

With the support of a judge, the New York Stock Exchange has settled a dispute with 10 of its members over its acquisition of Archipelago by agreeing to allow an independent review of the terms of the deal.

The 10 dissidents, led by William Higgins, had filed a motion asking State Supreme Court Judge Charles Ramos for a preliminary injunction to halt a vote on the deal planned for December 6th and to appoint an independent board to review the merger. The review, which will focus on both firms' current financial statements, will be completed within a week.

The settlement allows NYSE members to vote on the deal as scheduled. "We are pleased with the resolution of this litigation," said John Thain, the NYSE's chief executive, in a statement. "This resolution is in the best interests of our members, the future of the NYSE and America's capital markets."

The dissident NYSE seat-holders had said they should receive more than the proposed 70% of the merged group, with the remainder going to shareholders of Archipelago. They also claimed that the use of Goldman Sachs to advise both the NYSE and Archipelago in merger talks created a conflict of interest since Goldman owns a number of NYSE seats and has a major stake in Archipelago.The NYSE will now select a bank to review the deal.

"We got everything we needed and wanted," Mr. Higgins said. "Members will get a chance to vote ... and we can't stop people from voting for a bad deal."

The merger proposal, together with the Nasdaq Stock Market's plans to purchase the electronic trading platform of Instinet Group led Congress to consider the regulatory structure of the markets. At a hearing on mutual funds of the Capital Markets sub-Committee of the House Committee on Financial Services last May, Chairman Richard Baker (Rep. - Louis.) said that a single regulator for the nation's stock exchanges makes sense considering the consolidation on Wall Street.

Rep. Baker said that the current self-regulatory model, with its potential conflicts with the business side of the exchanges, poses problems. Critics of the current system have suggested a single regulator. "That probably is ultimately where we'll wind up," Baker said after the hearing.

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