Seat Holders at NYSE Lobbied by Rival Camps

John Mack, a leader of a group opposing the New York Stock Exchange’s planned merger with Archipelago Holdings Inc., said he spoke Tuesday with NYSE Chief Executive John Thain and won a promise from the Big Board leader to explain the deal to Wall Street firms.

The conversation came as representatives of both sides lobbied the exchange’s 1,366 seat holders, who will ultimately decide whether to proceed with the merger.

Mack, the former CEO of Credit Suisse First Boston and longtime Morgan Stanley executive, said Thain had agreed to meet with an undisclosed number of Wall Street firms to discuss the merger. Representatives of the firms had attended Monday a meeting called by former NYSE board member Kenneth Langone to air their concerns about the merger and discuss a possible counteroffer for the exchange.

“We are encouraged that these efforts have sparked an open discussion about maximizing value for the exchange,” Mack said in his statement. “We hope this process will allow firms to gather sufficient information to make a determination about the value of the proposed transaction.”

The NYSE had no immediate comment.

Representatives of the group headed by Langone and Mack spent Tuesday seeking support for their effort against the merger, according to two seat holders who received calls from both sides. A source close to Langone’s group said a number of other interested parties called to lend their support as well.

On the other side, NYSE leaders called a number of seat holders and Wall Street firms to talk up the merger’s benefits, sources said. Thain himself called at least one seat holder, they said.

NYSE spokesman Ray Pellecchia said Thain regularly talked with seat owners about the dealings of the exchange. A spokesman for Langone had no comment about any lobbying efforts

What seemed last week to be a slam dunk by Thain has been marred by Langone’s efforts to scuttle the merger, although the group has toned down its rhetoric and now says it wants to merely investigate the deal further. Langone nonetheless has managed to enlist Wall Street firms and unhappy seat holders to explore whether to make a counteroffer for the exchange or form a bloc of seats that ultimately could vote the merger down.

But both sides may have alienated a key constituency in their battle for the future of the NYSE -- the exchange’s floor traders. Some traders speaking privately said they feared for their jobs under both the merger plan and Langone’s effort, which they said would spell the end of floor trading at the exchange.

Some firms and individuals whose livelihood depends on the existence of floor-based trading -- where buyers and sellers come together in auctions managed by specialists -- are also seat holders. And the traders said they believed that they might have to organize in a third bloc to protect their interests.

Each of the seats on the exchange carriers voting rights. A merger requires the approval of holders of two-thirds of the seats, possibly making it easier for Langone and Mack to assemble enough seats to vote down the Archipelago proposal than it would be for Thain and other proponents of the agreement to assemble enough votes for approval.

The trick for both sides will be in appealing to the widest possible base. Among the seat owners are major Wall Street firms, smaller firms with far fewer resources, individual traders, speculative investors and individuals who use the seats to generate income for retirement by leasing the trading rights to other firms.