UPDATE 3-NYSE Euronext to sell stake in Amex options venue

* NYSE Euronext partners with seven other Wall St firms

* Says will remain largest shareholder of NYSE Amex unit

* Such deals have been done before; more could come
(Adds details on total options market share for CBOE and ISE
in paragraph 11)

By Doris Frankel and Jonathan Spicer

CHICAGO/NEW YORK, Sept 9 (Reuters) - Exchange operator NYSE
Euronext (NYX.N) (NYX.PA) plans to sell a significant stake in
its NYSE Amex options market to seven major Wall Street firms,
as it bets a boost in market share will offset the partial loss
of control.

Under the deal, the company has "agreed in principle on a
framework" with Citadel Securities, Goldman Sachs Group Inc
(GS.N), TD Ameritrade Holding Corp AMTD.O and others who
would become partners and gain equity interest in the fifth-
biggest U.S. options venue.

Observers said the move, which NYSE Euronext hopes will
bring it to 25 percent market share by the year's end, could
spark similar deals among rival exchanges. Combining its two
AMEX and NYSE Arca platforms, NYSE Euronext accounted for 18
percent of U.S. options last month, up marginally from last
year.

The company, which will retain the largest stake in AMEX,
did not say how much it was willing to give up, nor did it
outline the impact the tentative deal would have on revenue.

Edward Boyle, NYSE Euronext's senior vice president of U.S.
options said the stake sale "aligns us very closely with our
client base," adding "it's not a huge stretch" to reach 25
percent with AMEX and Arca combined.

NYSE Euronext, which also runs the New York Stock Exchange,
would continue to manage the day-to-day operations of AMEX
after any deal with the partners, which also include Bank of
America Corp (BAC.N), Barclays PLC (BARC.L), Citigroup Inc
(C.N) and UBS AG (UBSN.VX) (UBS.N). But a separate board and
head executive would supervise the exchange.

It expects the transaction to be completed by the end of
2009.

NYSE Euronext acquired the American Stock Exchange, now
called AMEX, last year as part of a broader move into
derivatives meant to offset flagging equity trading. Management
repeated in July it was looking for partnerships that would put
it among the options leaders, the Chicago Board Options
Exchange and the International Securities Exchange.

"The CBOE, the ISE and the other exchanges are not going to
sit idly either and let this happen," said Herb Kurlan, CEO of
Vtrader Pro, an online proprietary trading firm in San
Francisco. "They will try to create relationships that will
solidify their order flow as well."

The CBOE had 28 percent equity options market share in
August, while the ISE, which is owned by Deutsche Boerse AG's
(DB1Gn.DE) derivatives unit Eurex, had 29 percent, according to
the Options Clearing Corp.

CBOE's total market share including index options for
August was 32.5 percent, ahead of ISE's total market share of
27.4 percent.

"Each exchange has their own mechanisms for aggregating
liquidity -- often times it is related to membership
privileges, pricing models, or market structure," said Andy
Nybo, head of derivatives at research firm TABB Group.

"Other exchanges have market makers that are equity owners
as well," Nybo added, pointing to stock venues BATS Exchange
and Direct Edge.

BATS aims to launch an options market early next year,
while CBOE aims to launch a second venue, which would make nine
in the United States.

In 2005, the Philadelphia Stock Exchange, which trades
options and is now owned by Nasdaq OMX (NDAQ.O), sold a 25
percent equity stake to four banks. A year later, six
stakeholders had amassed an 89 percent stake.

Philadelphia "succeeded to some extent but they
subsequently were acquired by the Nasdaq," said Kurlan. "It is
a good strategy to capture order flow at the exchanges where
these firms make the investments."

The old American Stock Exchange, which also traded stocks
and pioneered exchange-traded funds, was once an options
powerhouse. But its market share diminished steadily since 2000
as rivals ramped up technology.

In March, NYSE Euronext opened the new AMEX floor next to
the Big Board and its CEO set the 25 percent combined Amex-Arca
market share goal.

Net trading revenue for U.S. derivatives, of which options
accounts for the vast majority, was $33 million in NYSE
Euronext's latest quarter, up from $19 million a year ago.

The company's shares were up 0.4 percent on Wednesday.
(Reporting by Doris Frankel in Chicago and Jonathan Spicer in
New York; additional reporting by Chakradhar Adusumilli and
Ajay Kamalakaran in Bangalore, editing by Matthew Lewis)