"FIN RAH!" ... A WELCOME CHANGE: WHY THE MERGER WAS NECESSARY TO PRESERVE U.S. MARKET INTEGRITY

Fordham Journal of Corporate & Financial Law, 2008 by Cervantes, Yesenia

In 1970, Congress enacted the Securities Investors Protection Act ("SIPA"), "creating the Securities Investor Protection Corporation ("SIPC") to administer a fund providing $50,000 of insurance protection to each customer of virtually all broker-dealers registered with the SEC."100 SIPA vested the SEC with the authority to: (1) compel SROs to implement any particular alterations or modifications to its rules, practices or procedures related to the regularity and scope of its investigations and examinations of its member firms; (2) require that SROs supply the SIPC and/or the sec with any reports or records concerning the financial state of specific SRO members; and (3) require that an SRO inspect a member company's financial state.101 The NYSE's Board of Governors asked the then former NYSE chairman, William McChesney Martin, Jr., "to prepare a comprehensive study of the New York Stock Exchange's constitution, rules, and procedures,"102 which later became known as the Martin Report.103

The Martin Report recommended reorganization of the NYSE to recognize "its public nature and the respective interests of the public, the companies listed on the exchange, and the members of the securities industry involved."104 As a result, the NYSE restructured its board such that it was "balanced between securities firms and issuer, institutional investor, and public representatives."105 Additionally, it created a nominating committee completely independent of both NYSE members and the NYSE board and gave the committee the responsibility of selecting new candidates for the board.106 The NYSE also "became a non-profit, non-dividend paying corporation, owned by its members."107

In December 2003, the sec approved the NYSE's proposed rule change to amend its constitution and again reorganize its governance.108 The most significant change was a decrease in the number of board representatives and complete independence from management of the NYSE.109 Up to this point, the NYSE's board had been comprised of up to 24 members.110 The approved governance structure in 2003 reduced it to "between 6 and 12 members."111

The next few years marked some extraordinary changes in NYSE history.112 The merger of the NYSE and Archipelago Holdings Inc., operator of an electronic communications network, officially ended the NYSE sale of seats on December 30, 2005. "3 This was a significant change to the NYSE's membership structure. The result was the "NYSE Group, Inc., a for-profit, publicly-owned company."114 Rather than taking the initial public offering route and offering new shares, the NYSE became a public company by virtue of its merger with Archipelago.115 The public could now own a piece of one of the major U.S. securities exchanges. In 2007, the NYSE merged with Euronext, the pan-European exchange running "stock exchanges in Paris, Amsterdam, Brussels and Portugal, as well as a derivatives exchange in London."116 This merger resulted in the "first trans-Atlantic stock exchange[,]"117 "offer[ing a] diverse array of financial products and services."118 Already known as "the world's largest and most liquid cash equities exchange,"119 the NYSE now gained an even greater presence in the markets. It was at this juncture that the organization was ready to engage in the most noteworthy merger in securities industry history-consolidation with the NASD.