March 1, 2004

Philly Goes Public, More May Follow

By Gregory Bresiger

Big floor-based exchanges across the United States are going to demutualize and it will happen "sooner rather than later," even at the Big Board. That's the prediction of an official of the Philadelphia Stock Exchange (PHLX), which recently received the approval of the Securities and Exchange Commission to demutualize.

"There's no question that, as we move down the line, there will be no membership, so-called not-for-profit, owner cooperatives as stock exchanges," Meyer "Sandy" Frucher, Chairman and CEO of the Philadelphia Stock Exchange told Traders Magazine. "I just think that structure has outlived its function." He said it would outlive its function at the Big Board "sooner rather than later."

Frucher said demutualization gives an exchange more flexibility than a cooperative club. "You have greater ability to bring in people who have new products and technologies because you can offer equity positions." Frucher added that, under mutualization, one "couldn't say I'll give you a quarter or a half of a seat."

Frucher also emphasized that PHLX can go ahead with this project, which became effective with SEC approval, because it is profitable. The demutualization plan was also supported by PHLX members by a margin of four to one.