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Wall Street Loves NSX

The National Stock Exchange, formerly known as the Cincinnati Stock Exchange, will join forces with investment banks.

A spokesman for the Chicago-based regional exchange said the NSX was working on putting together a group of investors. But she declined to elaborate. However, the Wall Street Journal reported Wednesday that Citigroup (C), Bear Stearns (BSC) and Credit Suisse (CSR) were potential investors. Knight Trading (NITE) and Bloomberg may also take a stake in the NSX.

The investing group reportedly would take a 50% stake in the NSX, with each firm sinking $5 million into the exchange.

The NSX investment is the latest in a string of regional exchanges taking cash from Wall Street firms. It is thought to be a low-cost strategic investment on behalf of brokers looking for another avenue for trading stocks. The deal also is a way for Wall Street firms to make an early-stage investment in an exchange that could be bought out or go public sometime in the future.

Last year, the Philadelphia Stock Exchange got a cash infusion from Morgan Stanley (MS), UBS (UBS), Credit Suisse and Citigroup.

In July, the Chicago Stock Exchange said that four brokers, Bank of America (BAC), Bear Stearns, E*Trade (ET) and Goldman (GS), took minority stakes in the exchange.

A year ago, the Securities and Exchange Commission sanctioned the NSX for allegedly allowing trading firms to cheat investors by failing to enforce the exchange's own rules. The NSX, as part of the settlement, agree to separate its regulatory function from its business operations. In addition, the exchange's CEO, David Colker, was censured and paid a $100,000 fine.

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