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June 4, 2007

NYSE Gets A Makeover

By Peter Chapman

Stocks? Floor trading? Any doubts that NYSE Group was going through a major transformation have been dispelled by recent events.

The just-completed merger between NYSE Group and Euronext and the successful implementation of the New York Stock Exchange's hybrid model have taken the Big Board far from its roots.

Grafting automatic executions onto the New York's traditional floor-based auction environment has resulted in an almost complete flip in the ratio of manual to electronic trading. Prior to hybrid, the Big Board was executing about 10 percent of its flow automatically under its Direct+ system. Automatic executions now account for more than 80 percent of all shares traded. No more than 20 percent of the shares are exchanged by humans on the floor.

The data emerging, following the historic merger between NYSE Group and the Paris-based Euronext, is equally telling.

If the newly combined organization had existed last year, then 19 percent of its revenues would have come from trading derivatives. That compares with 25 percent from trading cash equities-12 percent in the U.S. and 13 percent in Europe.

NYSE Euronext has a small presence in stock options in the U.S. through its NYSE Arca unit, but the bulk of derivatives revenues now come from Euronext.