NYSE Chairman Richard A. Grasso's Letter to Members Concerning "Demutualization"

To: All NYSE Members, From: Richard A. Grasso, Subject: "Demutualization" and a Public Offering. On July 30, 1999, I wrote to you that we were investigating whether to recommend to our Board that the Exchange convert to a for-profit business corporation. The effect of the conversion would be to separate the trading right from the equity ownership interest that together comprise a NYSE membership today. This would allow us to raise capital in the public markets and better enable us to pursue the strategies necessary to succeed in the increasingly competitive world we face. I want to share with you that at today's meeting, our Board authorized us to continue to move toward demutualization and an initial public offering. An investment banking team from Merrill Lynch's Financial Institutions Group reported to the Board on the steps that must be taken before we go to the public market. Our timetable remains aggressive. However, given the magnitude of this project and the broad public policy questions raised by the conversion, a target date in the year 2000 is likely. A committee comprised of our Public Directors will take a leadership role in working with management to resolve the public policy and other issues. This reflects the Board's recognition that the 70 million individual shareholders in the United States will look to the Exchange for leadership on the question of the future of our equities markets. Any decision to move forward will require Board, and ultimately, membership approval. We will assure that, before members are asked to vote on any conversion transaction that the Board may authorize, they will have detailed information and a full opportunity to have their questions answered. We will keep you updated.