The sharp increase in ETF listings, while a reflection of rapid ETF growth, attests to NYSE Group’s commitment to building its ETF business and diversifying its product base. The merger with Archipelago Holdings in March gave the NYSE’s fledgling ETF business a huge boost, as Archipelago’s all-electronic trading platform, ArcaEx®, had the largest share of ETF trading volume at the end of 2005. 

“Our goal is to become the dominant exchange for listing and trading ETFs,” said Lisa Dallmer, vice president of ETFs and Indexes for NYSE Group.  “We’re committed to offering investors the highest level of market quality as well as a broad array of investment offerings.”

In addition to listing 106 ETFs, the NYSE and NYSE Arca trade all listed and unlisted ETF products available to U.S. investors and represent a sizable 43 percent share of all ETF share volume handled in the United States as of June 2006.

“ETFs give investors more ways to invest,” said Ms. Dallmer. “They are vehicles for investors to diversify their investment portfolios, particularly as new types of ETFs come to market.” 

Exchange-traded funds, much like mutual funds, typically represent a basket of underlying securities. The majority are based on well-known indexes such as the S&P 500 and the NYSE Composite Index.  Unlike mutual funds, however, ETFs trade like stocks because investors are able to buy and sell them throughout the trading day.  Although each ETF is different, many offer certain tax efficiencies for investors. An ETF can be more tax-efficient for investors than a traditional mutual fund because an ETF fund manager does not need to sell securities from the portfolio to redeem shares, as a traditional mutual fund manager would need to. In the case of an ETF, if investors choose to sell the ETF shares, they can simply contact their broker and the transaction is facilitated by the NYSE, matching the seller and buyer directly. 

Over the past year, the NYSE has listed a variety of innovative ETFs based on everything from commodities and foreign currencies to fundamentally weighted indexes.  For example, in December, the NYSE listed the PowerShares FTSE RAFI US 1000 ETF (PRF), the first ETF based on a fundamentally weighted index, one that weights companies according to fundamentals such as book value, sales and dividends. Most ETFs are based on indexes that weight companies according to their market capitalization. 

In another high-profile listing, the NYSE in June received 20 WisdomTree ETFs , the first family of funds based on fundamental indexing by stock dividend distributions.  Another big debut was Rydex Investments’ family of foreign currency-based exchange-traded trusts.   The first currency exchange-traded product to the market, Euro CurrencyShares (FXE), listed in December 2004 at the NYSE.  The remaining six CurrencyShares, based on the currencies of Australia, Canada, Mexico, Sweden, Switzerland and the United Kingdom, listed this June. 

“Euro CurrencyShares have been very successful so far, and the NYSE has played a big role in that,” said Stephen Sachs, director of Trading at Rydex Investments, in a statement on the day it listed the six new CurrencyShares. “Listing on the NYSE—the largest and we feel the best capital market structure in the world—has really helped the product gain acceptance by the retail and institutional public.”

For issuers of innovative ETFs such as CurrencyShares, the NYSE is an especially attractive market because of its strong brand.  “Our name recognition,” said Ms. Dallmer, “is important for new issuers.  It gives them instant credibility with retail investors and active traders.” 

Not long after the NYSE’s announcement of its merger with Archipelago, the NYSE won a major coup when Barclays Global Investors, one of the world’s leading asset managers, announced that it would transfer 81 iShares  ETFs from the American Stock Exchange to the soon-to-be-formed NYSE Group—61 to the NYSE and 20 to NYSE Arca.  

“The decision to move the funds follows a yearlong, comprehensive review of the exchanges, during which BGI concluded that the NYSE and ArcaEx have unique attributes and a demonstrated commitment to building the technology and infrastructure that will facilitate trading iShares products in the future and support the growing iShares business,” said Lee Kranefuss, CEO of BGI’s Intermediary Business, in a press release last year. 

Forty of the 81 iShares had transferred to NYSE Group as of Sept. 14, with the remainder expected to transfer within the next 12 months. Fifteen iShares ETFs will move to NYSE Arca on Oct. 20.  Like other primary listed securities on NYSE Arca, these will have one lead market maker assigned to maintaining a continuous two-sided quote within minimum quote standards.    

NYSE Group will become even more attractive to ETF issuers as it builds out index calculation and intraday fund valuation services, which are essential to ETF providers.  Issuers use both services to provide additional transparency to investors in determining the value of their ETFs, which are priced continuously throughout the trading day. 

“We want to add more calculation services that issuers rely on to kick off the innovation and product-development process,” said Ms. Dallmer.

In addition, NYSE Group wants to continue improving the quality of trading in ETFs through technological innovations such as the NYSE Hybrid Market^SM , a dual automated and auction trading platform being rolled out on the floor.  The NYSE Hybrid Market offers more electronic order-entry choices for floor brokers and more auto-execution features for orders on the specialist book, both of which are expected to enhance the investor experience.  ETFs, which are based on the prices of other securities, will directly benefit from faster execution technology available in the Hybrid Market.

ETF trading volume has been rising appreciably since last year.  In the second quarter of 2006, NYSE Group handled an average of 195 million shares of ETFs daily, up 89 percent from the 103 million shares handled on average a year earlier.  

“We’re the leader in ETF trading and our expansion in ETF listings helps us to continue building on that lead,” said Ms. Dallmer. 

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About NYSE Group, Inc.
NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange).  NYSE Group is a leading provider of securities listing, trading and market data products and services. The NYSE is the world’s largest and most liquid cash equities exchange. The NYSE provides a reliable, orderly, liquid and efficient marketplace where investors buy and sell listed companies’ common stock and other securities. On Sept. 30, 2006, our listed operating companies represented a total global market capitalization of $23 trillion. In the third quarter of 2006, an average of 1.6 billion shares valued at $57.3 billion traded daily on the NYSE.

NYSE Arca operates the first open, all-electronic stock exchange in the United States and has a leading position in trading exchange-traded funds and exchange-listed securities. NYSE Arca is also an exchange for trading equity options. NYSE Arca’s trading platform provides customers with fast electronic execution and open, direct and anonymous market access.

NYSE Regulation, an independent not-for-profit subsidiary, regulates member organizations through the enforcement of marketplace rules and federal securities laws. NYSE Regulation also ensures that companies listed on the NYSE and NYSE Arca meet their financial and corporate governance listing standards.

For more information on NYSE Group, go to www.nyse.com. Information contained on our website does not constitute a part of the prospectus relating to the proposed offering.

Cautionary Note Regarding Forward-Looking Statements
Certain statements in this article may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on NYSE Group’s current expectations and involve risks and uncertainties that could cause NYSE Group’s actual results to differ materially from those set forth in the statements. There can be no assurance that such expectations will prove to be correct. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause NYSE Group’s results to differ materially from current expectations include, but are not limited to:  NYSE Group’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk and U.S. and global competition, and other factors detailed in NYSE Group’s Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by NYSE Group that the projections will prove to be correct. We undertake no obligation to release any revisions to any forward-looking statements.