Archipelago owns and operates The Archipelago Exchange (ArcaEx), a top three player in the U.S. over-the-counter (Nasdaq-listed) market by volume and an increasingly significant venue for trading NYSE and Amex-listed securities. In July to date, ArcaEx has reported handling over 25% of Nasdaq-listed and 4% of NYSE and Amex-listed shares in the US market, and has experienced record days this year with volumes as high as 730 million shares.
TSX Group's investment would be consistent with its articulated corporate strategy which includes geographic expansion and increasing its share of interlisted trading. ArcaEx's trading model is very similar to TSX Group's equity markets, the Toronto Stock Exchange and TSX Venture Exchange-a fully-electronic, price-time priority limit order book, open to participants on a fair and equal basis, and operated for profit. The companies are also exploring opportunities to serve their common customers more effectively on a North American basis.
Completion of the purchase is subject to approval by Archipelago's Board of Managers and 80% of its Class A members. Archipelago's Class A members also have rights of first refusal to purchase NBC's stake for a twenty day period following formal submission of the agreement by NBC. In addition, the Class A members have the right to participate in the sale to TSX on a pro-rata basis. TSX is not required to complete the purchase if more than one member, in addition to NBC, exercises its right to participate.
NBC's Class A shares carry rights which include, along with other members of the class, the rights to vote for and stand for election to some of the voting seats and non-voting advisory seats that comprise Archipelago's Board of Managers. Currently, the class has elected two representatives of NBC to hold non-voting advisory seats.
Subject to customary conditions of closing including obtaining all Archipelago and member approvals, and provided that existing members do not exercise their rights of first refusal on NBC's stake, closing of the purchase by TSX is expected to occur in the third quarter of 2003, at which time the purchase price will be disclosed.
