The Marketplace Report: Pricey Seats on the NYSE
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
The New York Stock Exchange announced this week that two of the seats on the exchange sold for $2.6 million each, just under the record set during the tech bubble six years ago. "Marketplace's" Hillary Wicai has this report.
HILLARY WICAI reporting:
The price of seats on the NYSE has more than doubled what they sold for about a year ago. Owning a seat gives you the right to trade on the exchange, and interest in seats has jumped since the NYSE announced plans to go public and buy Archipelago Holdings, an electronic trading firm. James Angel teaches finance at Georgetown University. Angel says under that deal, seat holders stand to make a profit because of the shares of stock they'd earn in the new company.
Mr. JAMES ANGEL (Georgetown University): If you look at the current share price for Archipelago, it looks like the deal is worth about $4 million to NYSE members, so the people who are buying those seats are getting a really good deal.
WICAI: But the merger between the NYSE and Archipelago is far from done. The Justice Department and the SEC are vetting the part floor trading-part electronic trading hybrid. The feds are looking for potential problems with antitrust and market regulation issues. Angel says they could demand concessions.
Mr. ANGEL: Typically, if one oil company buys another and they're going to own too many gas stations in one city, the Justice Department may demand that they sell some of those gas stations. With the NYSE merging with a very potent competitive threat, what will the regulators demand? Nobody knows. Will the demands be so onerous it breaks the deal? It could happen. In this business, anything can happen and usually does.
WICAI: Best estimates from the NYSE are that the deal could be finalized in late October, early November at the earliest pending those regulatory decisions. So at $2.6 million, is a seat such a deal?
Mr. MICHAEL GOLDSTEIN (Babson College): That's a bit too high, if you ask me.
WICAI: Michael Goldstein teaches finance at Babson College. He thinks the seats are overvalued given that the deal could fall apart. But it's not as if the average investor can line up to buy a seat on the exchange anyway, good price or bad. The price, he says, could signify the longevity of the exchange.
Mr. GOLDSTEIN: It's an indication they believe the New York Stock Exchange is going to be around for a while and that it will be successful as an ongoing business. You can tell that from both the seat prices and the lease prices for the seats.
WICAI: Longtime seat holders also believe the exchange will be around for a long time to come, even if it is in hybrid form. Ted Weisberg has been a member for more than 30 years. He says the near-record prices tell him to hold onto his seat, so to speak.
Mr. TED WEISBERG (Seat Holder, NYSE): The fact is that seats in general are a reflection of the state of the art at any given time, and yes, it is true, there is more and more automation, but it is also true that there is probably a greater need now than ever to have a physical presence on the trading floor because of all the automation.
WICAI: He says his customers want him on the floor, and he's staying. Other seat holders may just take the profits and run. I'm Hillary Wicai for "Marketplace."
CHADWICK: And thanks to Hillary from "Marketplace," produced by American Public Media.
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