PHLX.COM * NEWS RELEASE

These transactions (along with the Citadel and Merrill Lynch transactions in June) complete the first phase of the PHLX plan of strategic alliances with major securities market participants. If all warrants are fully exercised, the six strategic investors would own an aggregate of 89.4% of the PHLX common stock.

“We expect that all six of our strategic investors will achieve their performance criteria and will be entitled to exercise their warrants in full as of June 30, 2006,” said Meyer “Sandy” Frucher, chairman and CEO of the PHLX. “However, the importance and true value of these investments is not found in the relatively short performance period and terms, but rather in the long-term commitment by each of our strategic partners that is reflected in the significant equity stakes they have acquired.”

“ These investments by our partners will transform the Philadelphia Stock Exchange’s place in the capital markets,” Mr. Frucher continued. “This is a validation of our value proposition in options, which is predicated on speed, price and our directed order flow model. We also expect the business models we are developing in the equities (cash) and futures trading marketplace to be energized by the entry of our strategic partners. Overall, the Exchange should benefit greatly from our alliance with these substantial partners, each of which brings a significant securities market footprint and intellectual capital to our vision of a low-cost, electronic/hybrid market,” Frucher said.

The addition of Citigroup, Credit Suisse First Boston, Morgan Stanley and UBS as strategic investors was made possible by the demutualization of the PHLX in January 2004, when the members and seat owners voted overwhelmingly to convert from a seat-based to a share-based corporate structure. As a part of that effort, the Exchange also committed to aggressively pursue a strategy of striking alliances with major industry players and to fully develop its assets, including licenses in equities, options and futures, proprietary technology and its stock clearing subsidiary.

Frucher added, “The reorientation of the PHLX reflected by the investments by our partners highlights our evolution from a narrowly focused, reactive institution to one which emphasizes speed of technology, breadth of product and close interaction with all quarters of the trading community. The investments also speak to our ongoing commitment to best practices in regulation and institutional integrity.”

Frucher concluded, “These alliances will help us become a strong new competitive force in the rapidly consolidating securities exchange marketplace. Our long-term objective – to offer multiple product classes traded in one venue, at a competitive cost - will ensure that the investing public is not captive to the forces of market center convergence. The PHLX is committed to competing vigorously in the listed and OTC equity markets and to providing investors choice and the ability to manage their portfolio more efficiently and more comprehensively.”

Along with the addition of new strategic partners, the Exchange intends to make a share buyback offer to its original shareholders, whereby shareholders may tender their shares to the Exchange for consideration in the amount of $900 per share, subject to certain terms, conditions and procedures. The Exchange intends to offer to repurchase up to 16,700 shares of Class A Common Stock, and will reserve the right to purchase additional shares, with the expectation that at least 100 shares will be purchased from each tendering stockholder. The offer is expected to commence in September 2005, after documentation is prepared and distributed, and will be kept open for a minimum of 20 business days.

Robert A. Gerard worked with Exchange management to structure these transactions and to represent the PHLX in negotiations with the Strategic Investors. Keefe, Bruyette & Woods, served as Co-Financial Advisor, advising the PHLX Board. Willkie Farr & Gallagher LLP acted as counsel.
The Philadelphia Stock Exchange was founded in 1790.

The PHLX trades 2,000 stocks, 1,703 equity options, 25 sectors index options and currency options and futures. For more information about the PHLX and its products, visit www.phlx.com.

This press release contains “forward-looking statements” concerning, among other things, the likelihood that our strategic investors will be entitled to exercise their warrants in full, the value of the investments by our strategic partners, the commitment of our strategic partners to the PHLX, the transformational nature of these strategic investments in the PHLX, the business models we are developing in the equities and futures trading marketplace, the benefits of our alliance with our strategic partners, the evolution of the PHLX and the marketplaces in which it operates, our long-term objectives and our intention to make a share buyback offer on the terms presented. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties; actual results may differ materially as a result of various factors that affect the PHLX, its strategic partners and the marketplaces in which the PHLX and its strategic partners operate. These factors include, but are not limited to, general economic conditions; governmental and regulatory policies and changes; business conditions in our marketplaces; competitive forces, including price and fee pressures and technological developments; the success of business, operating and financial initiatives; and the level and timing of the growth and profitability of new products and initiatives.