The role of investment bank Goldman Sachs in the proposed purchase of electronic trading system Archipelago Holdings by the New York Stock Exchange continues to outrage the markets. Participants are pointing to the potential conflicts of interest that can arise from the fact that Goldman advised both sides of the deal. The investment bank has a 15.5% stake in Archipelago and owns 21 out of 1,366 seats on the NYSE.
Goldman will be able to scoop in a nice sum in the acquisition.

Archipelago announced yesterday that it plans to pay Goldman $3.5 million for advising on the transaction. In the letter dated April 15, disclosed by Archipelago in an SEC filing, Goldman is depicted as a facilitator of negotiations that also agreed to perform basic financial valuations.

In addition, the value of Goldman’s stake in the electronic platform has risen by about $77 million since the revelation of the deal by NYSE Chief Executive Officer John Thain. Goldman will own about 5.7 percent of the combined company that will get the name of NYSE Group Inc.

``Goldman makes out very well on all sides of the deal,’’ said James Ellman, who manages $50 million, including Goldman shares, as president of Seacliff Capital in San Francisco. ``Not only is this a homerun financially, if the deal closes as proposed, it bolsters their reputation.’’

Another conflict related to the merger is the attempt by former NYSE director Kenneth Langone to pull together a group of investors from Wall Street firms to offer a bid for NYSE. The investors are not overly happy to end up with 70% of the combined venture, saying the 212-year-old institution is worth more, if only for the value of its properties. It is not clear at this moment whether Mr. Langone will succeed in his attempts, as representatives of the Wall Street firms have decided to take time deliberating on the plan.