updated 5/13/2005 11:51:32 AM ET 2005-05-13T15:51:32

The New York Stock Exchange, responding to concerns from some of its members over terms of its planned acquisition of Archipelago Holdings Inc., said it is looking for ways to appease members who would like to change the stock-and-cash mix of the deal.

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As initially planned, the NYSE members who own the Big Board’s 1,366 “seats” would get $300,000 in cash per seat plus stock in the combined company, of which they would control 70 percent. Shareholders of Archipelago, which operates an electronic exchange that has rivaled the NYSE, would hold the remaining 30 percent.

“Since some members would prefer all stock and some would prefer more cash, we are exploring a mechanism, within the constraints of the deal, to provide some reallocation based on member preference,” said NYSE Chief Executive John Thain in a memorandum to exchange members that was dated Tuesday and released by Archipelago on Thursday.

The NYSE-Archipelago merger has been the subject of second-guessing in the weeks since it was announced on April 20. There has been some speculation that an alternative bid for the NYSE could surface, although so far, none has materialized.

“The NYSE is NOT for sale,” Thain said in the memo. He emphasized “that the NYSE is acquiring Arca.”

Thain said he and Archipelago CEO Jerry Putnam held a meeting last week with NYSE floor professionals. One of the issues discussed was members’ unhappiness over certain restrictions as to when members can sell their stock in the combined company, NYSE Group Inc., which will be publicly traded.

“We have heard your concerns on the length of the lockups. I emphasized that the lockups are only to protect the trading market from the sizeable overhang of stock,” Thain’s memo said. “I restated our intention to have a secondary offering as soon as possible following closing and periodically thereafter. That being said, we are considering to what extent the lockup can be shortened.”

Also addressed in the memo was the role that Goldman Sachs Group Inc. played in the transaction. Goldman gave advice to both the NYSE and Archipelago, although it didn’t negotiate financial terms and separate investment banks were brought in to issue fairness opinions on the deal.

Nevertheless, Goldman’s ties to both Archipelago and the NYSE have raised some eyebrows. The investment bank owns a chunk of Archipelago stock and operates a “specialist” stock-trading firm at the NYSE. Thain is a former Goldman president.

“The role of Goldman Sachs in this transaction was carefully considered before they were engaged,” Thain’s memo said. “Goldman Sachs has had a significant relationship with Arca over the last several years, including the lead manager of Arca’s IPO. Goldman was responsible for arranging the initial meeting between Jerry Putnam and me. Goldman’s role as a ’marriage broker’ was extensively reviewed by the Boards of both companies.”

The role of the NYSE floor also was discussed. The NYSE and Archipelago have said they want to keep both markets separate — Archipelago’s electronic exchange and the NYSE’s own market, which is centered on a physical trading floor but that is expected to become more automated as the Big Board rolls out a planned “hybrid market” platform.

But Thain said Putnam envisioned a link between the markets, “with floor brokers having the ability to trade outside of regular trading hours, and to access and trade (Nasdaq) stocks, options and ETFs on Arca, directly from their hand-helds on the floor.”

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