Trade your stock on the NYSE -- but don't buy NYSE stock
The same competitive pressures that led the Big Board to go public create uncertainty for its shares.
The shares opened sharply above Archipelago's final close of $64, hitting a high of $88 in the first week of trading. The fast start had some wondering whether the NYSE would match the stunning success of the Chicago Mercantile Exchange (Research), which has seen its shares rise tenfold since its 2002 IPO.
We're here to sound a cautionary note. The Archipelago merger accelerates the NYSE's belated move to electronic trading, will allow for cost cutting, and gives the exchange a currency to use for acquisitions -- it is already pondering a bid for the London Stock Exchange.
But much of this was priced into Archipelago shares, which tripled in the year leading up to the merger, says Rich Repetto of Sandler O'Neill. "The only thing that changed is the ticker."
Repetto, who has a sell rating on NYX, also noted the weakness of comparisons to Chicago: Futures contracts traded on the Merc are proprietary and can be traded only on the Merc, whereas equities are "fungible," tradable on any equity exchange.
The upshot is that the NYSE can increase its prices only so much before traders defect to other exchanges. So remember: The same competitive pressures that led the Big Board to go public create uncertainty for its shares.
More about the newly-public NYSE: