NEW YORK - The Nasdaq Stock Market Inc. has agreed to buy the Philadelphia Stock Exchange for about $650 million, moving it into the fast-growing US options market, people familiar with the matter said yesterday.
Nasdaq's acquisition will give the second-largest US stock market after the New York Stock Exchange about 15 percent of the options market, even as its traditional stock-trading business, which earns lower margins, gets squeezed by fierce competition.
Nasdaq, which plans to launch its own options trading market in December, edged out bigger rival NYSE Euronext and other bidders in a weeks-long race to buy PHLX, the sources said.
The deal is yet to be finalized, they said.
NYSE Euronext - which owns NYSE Arca, an options platform with about 13 percent of the market - was a close bidder for PHLX, according to one person familiar with the matter.
Both exchanges compete fiercely for trading share and listings and are eyeing derivatives trading, which includes options and futures contracts, to drive future US growth.
US options trading has seen explosive growth in recent years. More than 2 billion options contracts were traded as of Oct. 30, a 38.4 percent increase over the same period last year, according to the Options Industry Council.
"It's attractive because options trading is growing much faster than stock trading," said Morningstar analyst Patrick O'Shaughnessy.
He said getting into options is a way for stock exchanges to diversify their revenue sources, while "leveraging much of the same infrastructure they already have in place."
The Chicago Board Options Exchange and the International Securities Exchange , which reported a 33 percent quarterly profit yesterday, together hold about two-thirds of the US options market.
Nasdaq will buy PHLX with cash raised from the recent sale of its 30 percent stake in the London Stock Exchange, one person familiar with the matter said.
