Nasdaq may buy Philly exchange

Nasdaq Stock Market Inc., the all-electronic exchange that handles the most shares in the U.S., plans to buy the Philadelphia Stock Exchange to enter the options business, two people familiar with the transaction said.

Rumors of the deal helped drive Nasdaq’s own shares to a record high Tuesday. The stock jumped $1.06 to $48.81. The price is up 58% this year -- at a time when shares of many other financial services companies have been hammered.

Nasdaq agreed to purchase the Philadelphia market for about $650 million, according to the people, who declined to be identified because the negotiations aren’t public.

The deal, which isn’t final, was approved by the board of the Philadelphia exchange Tuesday, one of the people said. Nasdaq’s board must also approve the transaction, which may be announced as soon as today, the person said.

Nasdaq Chief Executive Robert Greifeld is moving to acquire the Philadelphia market as Nasdaq creates its own trading system to expand into the faster-growing $1-trillion market for stock “put” and “call” options.

Spokeswomen Barbara Sorid of the Philadelphia exchange and Silvia Davi of Nasdaq declined to comment.

Exchanges worldwide have been merging as they seek to meet investor demand to trade securities and derivatives in one place.

Options trading has surged 36% this year, the fastest pace since 2000, as investors increasingly turn to derivatives to boost returns.

“Volumes are increasing and the retail public is becoming more and more aware of options,” said Danny Rosenthal, co-chief executive of OptionsHouse Inc., a Chicago-based online broker.

Options give an investor the right to buy or sell a set amount of stock at a specified price by a set date. They can be used to speculate on stock price moves or hedge against market declines.

The Philadelphia exchange is the third-largest U.S. options market, behind the Chicago Board Options Exchange and the International Securities Exchange.