John Thain, the NYSE chief executive, hailed the merger as a ground-breaking move to modernise the world’s largest stock exchange, but some of the Big Board’s seat-holding owners said they opposed the deal. They believe that the exchange is being partially sold off on the cheap.

The 1,366 seat holders will receive $400 million (£208 million) in cash as part of the deal. A new for-profit company called NYSE Group, which will be 70 per cent owned by the NYSE and 30 per cent by Archipelago, will be created by the merger. The new entity will spin off the NYSE’s regulatory arm — recently invigorated after coming under intense criticism for failing to stem a floor-trading scandal — into a not-for-profit oversight entity.

Mr Thain will be chief executive of NYSE Group; Gerry Putnam, chief executive of Archipelago, will be president, and Marshall Carter, the recently appointed chairman of the NYSE, is expected to keep his role.

It is understood that the NYSE’s plans to create a “hybrid” trading platform, including some traditional open outcry trading and some computer trading, will remain in place. NYSE customers will have the option to trade on Archipelago’s electronic system after the deal. But the companies are expected to unveil plans for a new electronic platform soon.

The deal is designed to silence the NYSE’s many critics who have complained that, as a not-for-profit company based around open outcry trading, the Big Board was in danger of losing its place as the world’s leading share dealing platform. The new company will be “a world class competitor in every respect,” Mr Thain said, adding that it could expand into trading options and other derivatives. He noted that stock exchanges in London, Toronto and Frankfurt are all publicly traded companies.

The merger could pave the way for talks between the NYSE and the London Stock Exchange (LSE), which is being courted by the Deutsche Börse and Euronext, the Continental exchange operator. The LSE, which already operates an electronic trading platform, and NYSE have held strategic talks in the past.

The deal could also open the door to a merger with one of the two Chicago electronic exchanges, the Chicago Board of Trade and Chicago Mercantile Exhange. The Mercantile Exchange floated in 2002. Since then its shares have surged five-fold.

The NYSE transaction, which is expected to be complete by early next year, raises the stakes in its battle with the Nasdaq Stock Market, which is in talks with private equity investors to buy Instinet, the brokerage and electronic trading group controlled by Reuters.

“It’s of huge significance for the industry — the New York Stock Exchange just acquired this humungous competitive advantage,” said Warren West, president of Greentree Brokerage Services in Philadelphia.

But the deal must still be approved by Archipelago shareholders, NYSE seat holders and the US Securities and Exchange Commission, the regulator.

Bill Higgins, head of the New York Stock Exchange Seat Holders Association, said he did not like the merger even though he has campaigned to make the NYSE a for-profit entity since 1999. “I am at a complete loss,” he said. “To give away 30 per cent of the Stock Exchange is madness”.

“This is not a done deal. The members still must vote.”

Archipelago is 15 per cent owned by Goldman Sachs, where Mr Thain was president and chief operating officer until he joined the NYSE last year. Archipelago is also part owned by Credit Suisse First Boston, Merrill Lynch, and JP Morgan Chase, all investment banks that are big customers of the NYSE.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive