Suit Challenges Amex-Nasdaq Merger
NEW YORK (AP) _ A member of the American Stock Exchange filed a lawsuit Wednesday to block a vote on a proposed merger between the Amex and the Nasdaq Stock Market until more information is released about the plan.
The lawsuit filed in U.S. District Court in Manhattan sought to stop a June 25 vote by Amex members deciding whether to combine the nation’s second- and third- biggest stock markets. The lawsuit sought class-action status.
The lawsuit named as defendants the American Stock Exchange Inc. and the National Association of Securities Dealers Inc. The NASD is the parent of the Nasdaq market.
Amex spokesman Dan Noonan called the complaint ``totally without merit.″ NASD spokesman Michael Jones said his organization is ``confident that the transaction is in the best interest of all the parties and that all appropriate procedures have been followed.″
In her lawsuit, Selma Philipson, a Maryland resident, said those who created the merger plan were negligent in failing to adequately explain how it would work and to protect Amex members who currently own exchange seats worth between $425,000 and $450,000.
The deal requires backing from two-thirds of the Amex’s 864 members, including traders, brokers and investors who buy exchange seats for their value and lease them. The Amex is owned by its members.
Melvin I Weiss, a lawyer who represents several Amex members who are not named as plaintiffs but who support the lawsuit, said Amex executives have alarmed the membership by suggesting the exchange could go broke without the merger.
``There are numerous members upset about this,″ he said. ``They’re threatening you with possible insolvency and they don’t tell you anything.″
Much of Ms. Philipson’s lawsuit questioned how the Amex and Nasdaq can smoothly combine their trading systems. The Amex operates like the New York Stock Exchange, with dealers making trades in person with shouted bids. The Nasdaq, though, has no trading floor and relies on a computer network to trade stocks.
The lawsuit said the NASD, the parent of the Nasdaq market, has agreed to pay Amex Chairman Richard Syron, who negotiated the terms of the deal for Amex, a generous severance package.
It also said a number of Amex governors who voted to approve the deal are also members of the NASD and have a conflict of interest.
The lawsuit suggested Syron may understated the difficulty of the merger when he stated publically, ``We may have been optimistic about the timing of this deal.″