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April 30, 1999

NASD and PHLX Part Ways On Plans to Merge Business

By Staff reports

Are NYSE and PHLX Planning Partnership?The National Association of Securities Dealers and the Philadelphia Stock Exchange (PHLX) have shelved plans to combine the equity and options businesses of the American Stock Exchange and the PHLX.

"After months of exploring the viability of a possible combination, the parties have determined that a combination is not feasible," according to a statement issued on behalf of both exchanges.

As exchange officials formally announced their decision, rumors were circulating that the PHLX is discussing an alliance with a new partner - the New York Stock Exchange.

The original plan, announced last year, fell apart as confidence in an AMEX and PHLX merger began to erode. According to some accounts, the options industry is changing in a way not envisaged a year earlier.

The competitive pressures are mounting as regulators push a plan to allow multiple listing of options among U.S. exchanges. A planned electronic options exchange, by a consortium of broker dealers, casts further doubt on the economic rationale for a merger.

But other factors contributed to the collapse of the deal, according to industry pros. Some PHLX options traders were said to be upset with the proposal to transfer Dell Computers options to the AMEX. There were fears over the future value of their seats. A recent cover on Business Week, alleging a price-fixing scam on the AMEX, also hurt the merger.

The statement issued on behalf of the AMEX and PHLX says the decision to terminate the merger plan "was outlined in a letter sent from the NASD to the PHLX, which also suggested that discussions continue to explore other possible alternative structures. Those discussions, which are continuing, include working on completing the details of an interim technology agreement."

Meanwhile, rumors are swirling that the PHLX and the Big Board are eyeing each other as partners. An arrangement would reintroduce the Big Board to trading options, which it had earlier abandoned.

A spokeswoman for the NYSE said the exchange doesn't comment on speculation and rumors.