NYSE Merger Plans Hit Resistance

Don't call the designers to revamp the New York Stock Exchange trading floor just yet.

Following news of NYSE's merger plans with Archipelago Holdings to emphasize electronic trading last week, business journalists reported on some powerful resistance to the proposal this week.

Former NYSE board member Ken Langone questioned the financial sense behind the merger and declared intentions to buy the Exchange to preserve floor trading. Langone's involvement creates some interesting angles for reporters to explore.

"Langone's had an interesting relationship with the NYSE," says Pradnya Joshi, business reporter for Newsday. "He's a larger-than-life personality who sometimes comes off as brash. There was some falling out with him over Dick Grasso's compensation."

Langone was head of the committee that approved Grasso's highly publicized $190 million compensation package, which has become the subject of a lawsuit by state officials.

He has also enlisted counsel of John Mack, former CEO of Credit Suisse First Boston, and Stanley Druckenmiller of Duquesne Capital Management in his bid to acquire the Exchange.

But that bid will require billions of dollars. The deal with Archipelago is valued at $3.2 billion and, operating under the impression that will go forward, reporters should establish a framework for coverage.

"Help readers understand the facts of the business deal and what is going on," Joshi says. "A lot of individual investors don't know and don't want to know how stocks get traded. It's not very easy to understand.

"Try to smooth out the process and convey the idea that you have a give and take auction system."

Some of the best sources to turn to in a proposed merger such as this are academic professors, rather than stock analysts. Joshi recently turned to James Angel at Georgetown and Richard Sylla at New York University. She also consulted Benn Steil on the Council of Foreign Relations for perspective.

Question these sources about how an emphasis on electronic transactions will change the face of trading.

"Ask if the floor-based model is going to go away," Joshi suggests. "The floor model hasn't been as profitable as it used to be. Some see this change as inevitable. Ask what is going to happen to the individual investor."

Competition with other markets was widely reported as one of the chief reasons the NYSE struck the deal with Archipelago.

The NASDAQ quickly fired back, announcing the acquisition of electronic network Instinet Group for $934.5 million to streamline its own transaction business and bolster its competitive edge. Joshi points out that the NASDAQ has had to deal with a lot more competition than the NYSE has.

When tackling a technical subject like electronic trading, keep in mind that language can easily go over readers' heads. Use clever leads to draw the reader in and subsequent text that is clear and understandable.

"Even though it can be very technical and seem like an inside Wall Street story, there are ways of making it appeal to the general public," Joshi says. "Explain how change at the NYSE is going to affect them."

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism