Lehman Acquires Van der Moolen's Specialist Business

Wall Street investment bank Lehman Brothers (LEH) said Tuesday it would acquire Van der Moolen's (VDM) NYSE specialist business and certain technology, confirming rumors that began circulating late last week (full story). Lehman said it would use the unit to establish a market-making firm that will trade in 416 NYSE-listed issues, making it the number-four NYSE specialist. Van der Moolen said it had sold the assets for zero consideration, and that it would take a €40 million euro ($59M) "derecognition" charge, excluding severance and restructuring charges. "This transaction marks the end of an era for our company," VDM CEO Richard den Drijver said, adding the firm's U.S. focus will now center on trading at the Chicago Board Stock Exchange [CSBX]. The firms expect the deal to close on Dec. 10.

Former Lehman CFO and Bernstein analyst Brad Hintz had said the prospect surprised him in light of attempts by investment banks to internalize order flow. But media reports say the NYSE may be in talks with several firms about becoming specialists to add to the exchange's current six -- units of Bank of America (BAC), Goldman Sachs (GS) Bear Stearns (BSC) and Lehman, along with LaBranche (LAB) and Kellogg. Sources noted possible rule changes on the NYSE floor could bolster specialists' profitability.

Sources: Press release I, II, III, MarketWatch, Reuters
Commentary: Specialist Exodus Poses Problem for New ETFs

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