Blahg, blahg, blahg – Q&A: Hybrid and Direct+, OpenBook and Arca

By: Ray Pellecchia

File Under: NYSE, NYSE

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A correspondent from investment banking posts:

Hi,

I read a lot of documents on your website but I can not find any real clear answers to some questions.

Is the technical part (automatic execution) of the Hybrid Market fully based on the Direct+ existing infrastructure? So when you want to release this Hybrid market you will just remove the limitations (frequency and quantity) on the some stocks as you did for ETFs?

Will the real-time OpenBook (no more 5-second delay) keep the same protocol as now? As the new Hybrid will certainly makes the volume higher, will your recommendation in term of bandwidth still be the same?

Will some Arca technology be used by the NYSE? Or will the two platforms still be "separated"?

Thanks in advance for your answers. – Cedric Leboul

Cedric – The automated-execution component of the Hybrid Market is indeed based on the existing NYSE Direct+ infrastructure. And yes, as part of Phase III of the introduction, we will eliminate the restrictions on Direct+ order size and frequency as well as type (currently, only limit orders are eligible). Of course, the Hybrid also involves many new features beyond Direct+, as we’ve been blogging from the get-go.

The new OpenBook release is pending SEC review, and by definition, refreshing every second will mean more throughput than every five seconds. (Throughput? Your humble blogger is getting more techie all the time.) OpenBook was never delayed but rather refreshed in real time at various intervals. Anyway, here’s the spec and other information you need to know about NYSE OpenBook.

You may also want to add your name to our OpenBook email list at nysedata.com, and we will notify you automatically of any changes in the OpenBook product.

On the question about Arca technology, the Big Board today has a highly sophisticated and robust trading platform that is custom-made for Hybrid – built for a rich diversity of trading choices and information pathways. Direct+ already executes triple the volume that Arca does in our listed stocks -- no knock against our future partners, but just a fact – as we pointed out the other day. Our platform also has a broad range of tech tools to help specialists and brokers continue to provide value to customers. As with any merger, we’ll be looking to explore synergies, but our plan is to retain the distinct value of each market.

Thanks for writing. And speaking of writing, please forgive our lawyers for writing ... and writing ... and writing ... :

Important Acquisition Information With Respect To The Merger

In connection with the proposed merger of the New York Stock Exchange, Inc. ("NYSE") and Archipelago Holdings, Inc. ("Archipelago"), NYSE Group, Inc. has filed a registration statement on Form S-4 with the Securities and Exchange Commission (SEC) containing a joint proxy statement/prospectus regarding the proposed transaction. The parties have filed other publicly available relevant documents concerning the proposed transaction with the SEC. The SEC de-clared the Registration Statement effective on November 3, 2005.

NYSE MEMBERS AND ARCHIPELAGO STOCKHOLDERS ARE URGED TO READ THE FI-NAL JOINT PROXY STATEMENT/ PROSPECTUS REGARDING THE PROPOSED TRANS-ACTION BECAUSE IT CONTAINS IMPORTANT INFORMATION.

NYSE members and Archipelago stockholders can obtain a free copy of the final joint proxy statement/prospectus, as well as other filings containing information about NYSE and Archipel-ago without charge, at the SEC's website (http://www.sec.gov). Copies of the final joint proxy statement/prospectus can also be obtained, without charge, by directing a request to the Office of the Corporate Secretary, NYSE, 11 Wall Street, New York 10005, 212-656-2061 or to Archipel-ago, Attention: Investor Relations, at 100 S. Wacker Drive, Suite 1800, Chicago, Illinois 60606 or calling (888) 514-7284.

This correspondence shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicita-tion or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Forward-Looking Statements

Certain statements in this correspondence may contain forward-looking information regarding the NYSE and Archipelago and the combined company after the completion of the transactions that are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These statements include, but are not lim-ited to, the benefits of the business combination transaction involving NYSE and Archipelago, including future financial and operating results, the new company's plans, objectives, expecta-tions and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of NYSE's and Archipelago's management and are sub-ject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; the risk that the businesses will not be integrated success-fully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third-party relationships and revenues; social and political condi-tions such as war, political unrest or terrorism; general economic conditions and normal business uncertainty. Additional risks and factors are identified in Archipelago's filings with the Securities Exchange Commission, including its Report on Form 10-K for the fiscal year ending December 31, 2004 which is available on Archipelago's website at http://www.Archipelago.com, and the Registration Statement on Form S-4 filed by NYSE Group, Inc. with the SEC on July 21, 2005 (and amended on September 24, 2005, October 24, 2005 and November 3, 2005).

You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. Except for any obligation to disclose material information under the Fed-eral securities laws, none of the NYSE, Archipelago or the combined company after the comple-tion of the transactions undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this document.