Nasdaq, which previously announced plans to launch its own options trading market by December, edged out archrival NYSE Euronext and other bidders to buy PHLX, the nation's oldest exchange.
Nasdaq, whose shares rose more than 1 percent, plans to preserve the options market, which is conducted both electronically and through a trading floor in Philadelphia.
The Philadelphia Stock Exchange's operations will become part of Nasdaq's market services business.
Options Business on the Rise
Options markets are in demand since they offer higher margins than stock markets, where competition and the advent of alternative electronic networks have hurt trading volume and squeezed profit.
The business also has been growing rapidly. PHLX on Tuesday said equity options volume in October was up 59 percent from last year at 42.2 million contracts traded.
"Diversification seems to be the name of the game for exchanges at the moment," Celent analyst Cubillas Ding said.
The Philadelphia deal follows Nasdaq's agreement last month to take over the Boston Stock Exchange for $61 million. In September the company struck a deal to buy Nordic market operator OMX jointly with Borse Dubai for about $4.9 billion.
These agreements follow Nasdaq's decision to abandon an unrequited effort to buy the London Stock Exchange.
But the PHLX deal will be funded with Nasdaq's proceeds from the sale of its 30 percent stake in LSE.
Nasdaq said it expected the Philadelphia acquisition to close in the first quarter and lead to increased earnings in 2009. A Nasdaq spokesman declined to disclose the 2008 financial impact of the deal, job cut projections or Philadelphia's revenues.
Greifeld to Remain CEO
The deal will also bring Nasdaq a futures market operated by the Philadelphia Board of Trade, a small equities business and the Stock Clearing Corp of Philadelphia.
Robert Greifeld will remain CEO of Nasdaq Stock Market, while Sandy Frucher will continue as CEO of the Philadelphia Stock Exchange.
Because much of Philadelphia is being preserved, analysts don't expect a lot of cost savings from the combination.
Celent's Ding cautioned: "Buying into order flows is no guarantee that these flows can be successfully retained.
There is a question mark around this aspect of how Nasdaq plans to retain flow."
And Fox-Pitt Kelton analyst Edward Ditmire observed that PHLX's owners, all brokers and dealers, might have less incentive to route their trades through Philadelphia after they sell.
"Concerns exist that the transaction itself could loosen ties to these customers," he said.
PHLX is partly owned by a group of Wall Street firms: Merrill Lynch, Citadel Derivatives Group, Morgan Stanley, Citigroup, Credit Suisse and UBS.
Nasdaq shares were up 59 cents, or 1.2 percent, at $49.40 at midday.