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Big Board to Trade ETFs and HOLDRs Under UTP

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The New York Stock Exchange said it will soon begin trading 17 HOLDRs and 10 exchange-traded funds on the basis of unlisted trading privileges (UTP). All 27 of these funds are listed on the American Stock Exchange, and the move represents the second time the NYSE has used UTP to trade AMEX-listed ETFs. Currently, the NYSE trades three of the AMEX's most popular ETFs - QQQ, SPY, and DIA. The exchange also lists the iShares S&P Global 100 (IOO).

HOLDRs, which stands for Holding Company Depository Receipts, are Merrill Lynch's fixed baskets of sector stocks. The Big Board will also trade 9 select sector SPDRs and the MidCap SPDRs, which are tied to the S&P MidCap 400 index. Today, the MidCap SPDRs (MDY) were the fifth-ranked ETF in terms of daily trading volume on the AMEX. The MidCap SPDRs are also the third-largest ETF, with $5.44 billion in assets at the end of February, according to Morningstar. The sector SPDRs are narrower funds that break down all the companies in the S&P 500 by industry.

The NYSE said the funds should begin trading on the exchange sometime in April.

The announcement clearly demonstrates the Big Board is interested in claiming a piece of the action in the burgeoning ETF market. In January, the exchange inked a deal with Dow Jones Indexes to launch new benchmarks as the basis of future exchange-traded funds.

Today's announcement is a little curious with the rumors swirling that the Big Board may be considering a purchase of the AMEX, since the smaller exchange's ETF and options businesses are the real jewels for any potential suitor. If the NYSE's recent moves provide any hints about its strategy with ETFs, then it seems willing to simply trade AMEX-listed funds or launch ETFs tied to its own indexes.

The AMEX, in the meantime, is working on separating from its parent corporation, the National Association of Securities Dealers (NASD). The NYSE declined to comment on the issue, saying only that the exchange frequently receives inquiries about acquisitions of or alliances with other markets.

"The current request from the bankers for the NASD is simply the latest such inquiry," said the NYSE in a statement.