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September 30, 2003

CNBC Sells Stake in Archipelago

By Gregory Bresiger

CNBC, the financial cable news organization, has sold its 4.85 percent stake in Archipelago. The stake was valued by CNBC sources at between $10 million and $12 million. It was sold to Archipelago shareholders, who had the first right to buy it. Another suitor, the Toronto Stock Exchange had been interested in buying the stake, sources said.

A CNBC spokesman declined comment. However, Archipelago officials said the sale worked out for them.

"We see it as a good sign. It shows that our own shareholders believe we're going in the right direction," said a spokeswoman for Archipelago. She noted that Archipelago, and its ArcaEx trading platform, have been in the black since earlier this year.

Analysts agreed that the private firm is profitable, but only marginally. The total equity of Archipelago is about $200 to $250 million, based on the value of the CNBC stake.

"Archipelago does everything right. They are going to be a long term player, but I am frankly shocked that CNBC sold their stake," said John Wally' Sullivan, president of Pulse Trading, an electronic institutional brokerage.

Archipelago, which evolved from an ECN to a stock exchange, was one of the original four ECNs approved by the Securities and Exchange Commission in January 1997.

With CNBC leaving, Archipelago still has some of the heavyweight investors of the trading industry, each holding stakes of about one to two percent. These include Goldman Sachs, E*Trade, J.P. Morgan, American Century Companies, Merrill Lynch, Instinet, BNP Cooper Neff and American Century Companies. (The latter has one half of one percent).

When CNBC completes the deal it will announce that it sold its stake because it was in keeping with its core business strategy, sources said.