Intensified competition between NYSE and NASDAQ for company listings could provide a unique cost-saving opportunity to companies that are considering a near-term listing on NYSE but do not initially meet NYSE’s listing qualifications.The SEC recently approved a petition by NYSE Group, Inc. that will enable companies that initially list on NYSE Arca to subsequently transfer their listings onto NYSE without paying NYSE’s initial listing fees (which can be as high as $250,000 for large companies) or prorated annual fees ($930 per million shares, or $93,000 for a company with 100 million shares listed) for the first partial calendar year.

In an effort to compete with NASDAQ for growth companies, NYSE Group, Inc., acquired the fully electronic stock exchange now known as NYSE Arca in March 2006. NYSE Group is marketing its multiple listing platforms as an integrated suite, positioning NYSE Arca as an alternative listing venue for growth companies whose ultimate objective is to list on NYSE.Waiver of NYSE listing fees provides an attractive incentive for companies seeking to list on NYSE in the near term to list initially on NYSE Arca instead of NASDAQ. However, because NYSE Arca is relatively unproven as a long-term listing platform, it is uncertain whether it will be a viable long-term listing venue for companies that do not expect to ultimately list on NYSE.

In the past, very few companies have had a meaningful choice in their selection between listing on NYSE or NASDAQ.The differences in the listing qualifications between the two exchanges have historically dictated the selection of listing platform.NYSE’s market capitalization requirements and financial criteria have rendered NYSE inaccessible to many growth companies, leaving NASDAQ as the only available major listing platform.

With its March 2006 acquisition of Arca (formerly known as Archipelago Holdings), NYSE began competing with NASDAQ for growth companies that previously did not qualify for listing on NYSE. With market capitalization, minimum share price, and financial criteria listing qualifications that are tailored towards growth companies, a listing on NYSE Arca is accessible to many growth companies that previously had no choice in listing platforms.NYSE Arca is priced competitively with NASDAQ, with initial public offering fees that mirror those of NASDAQ for most IPOs.Annual listing fees on NYSE Arca, however, can be up to approximately 30% more than NASDAQ’s fees.In addition, NYSE Arca does not charge an original listing fee for issuers that transfer from NASDAQ.

As a new listing platform, NYSE Arca currently lists approximately a dozen companies, and no company has yet transferred its listing from NYSE Arca to NYSE.Only history will tell whether NYSE Arca will alter the distribution of listed companies between NYSE and NASDAQ.In the meantime, issuers should benefit from continued competition between the exchanges.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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