The Nasdaq Stock Market, Inc. announced that it has entered into a definitive agreement to acquire the Philadelphia Stock Exchange.

Under the terms of the agreement, Nasdaq will pay US$652 million in cash for the Philadelphia Stock Exchange. This transaction is expected to close in the first quarter of 2008 and to become accretive to 2009 earnings. The board of directors of each company unanimously approved the transaction and it is subject to other customary approvals.

Nasdaq says that the acquisition of the PHLX, the third largest options market in the U.S. and the nation’s oldest stock exchange, significantly diversifies its product portfolio by providing Nasdaq with one of the premier options trading platforms in the U.S.

It currently plans to preserve the Philadelphia Stock Exchange’s market structure, continuing to operate the electronic options trading platform alongside the options trading floor in Philadelphia. As previously announced, Nasdaq will launch a separate, electronic options trading system in December. This deal will make it the third largest options market in the U.S. with a 15% market share.

“Philadelphia has successfully offered floor and electronic trading for some time. We think this capability will continue to be the best approach to serving options traders as the options market continues to evolve,” said Chris Concannon, Nasdaq executive vice president of Transaction Services. “In addition to firmly establishing Nasdaq’s presence in the options market, this acquisition also enhances our organic growth strategy, which will come to fruition next month when we launch our price/time priority options platform.”

“This strategic combination achieves our goal of diversifying our product and service offerings with attractive benefits to our trading clients while generating strong financial returns. Our goal at Nasdaq continues to be to develop customer-focused products and solutions that serve our issuer and trading client base,” stated Bob Greifeld, president and CEO of Nasdaq. “Nasdaq has extensive experience in integrating technologies and businesses and we will be able to seamlessly integrate PHLX with the Nasdaq Stock Market.”

Philadelphia Stock Exchange chairman and CEO Sandy Frucher commented, “After a lengthy, in-depth review of alternatives for the future of this exchange, we believe that combining with Nasdaq is the best outcome for our customers, shareholders and the trading community as a whole. No other exchange is better positioned for the future based on technology, products and overall passion for continuously redefining the definition and value of stock exchanges around the world. We have watched Nasdaq evolve into a multi-asset, world class global enterprise. We’re truly excited about our prospects for the future as part of Nasdaq and look forward to having an active role in improving trading efficiency and stock exchange value.”

Following the close of the transaction, Greifeld will continue to lead The Nasdaq Stock Market, Inc., including the Philadelphia Stock Exchange. Frucher will continue as CEO of the Philadelphia Stock Exchange.

In addition to the options market, as part of the Philadelphia Stock Exchange acquisition, Nasdaq will acquire a futures market operated by the Philadelphia Board of Trade, an equities business, and the Stock Clearing Corporation of Philadelphia.