Deutsche Boerse will own about 59 percent to 60 percent of the joined entity. The combination, following a decade-long wave of mergers among exchange companies, would unite equity and derivatives platforms from the U.
An agreement may be announced early next week, one person said. They restarted talks late last year, a person familiar with the matter said. They held a second round of talks in , said people familiar with the matter who declined to be identified because the negotiations were private. The Frankfurt-based exchange also bid for London Stock Exchange Group, one of four companies that tried to purchase it in the past decade.
Deutsche Boerse climbed 1. And of course, the NYSE has a powerful brand. In fact, the composite is increasingly lucrative, as exchange-traded funds investment funds that are traded on stock exchanges ; index funds and other new products are derived from it. On balance, though, the business case for this merger is not overwhelming, according to Blume. DB has the Eurex platform, one of the biggest for trading derivatives.
These moves would likely provide small efficiencies and savings, along with the ability to lure new trading and listing customers with instant multinational reach, although the NYSE and DB would need an Asian partner to become truly global. The combined company might be able to make a stronger grab for those new trading markets than either exchange could on its own.
One factor that is halting enthusiasm for this pairing, however, is that right now, the operations can only be consolidated and combined to a point. The numerous exchanges and trading platforms of the merged entities would still operate in different countries with their own regulating agencies, and rules and guidelines that can be out of sync with one another. He says that regulators tried, but ultimately failed, to create some common standards in the wake of the recent financial meltdown.
And he points out that having to maintain dual headquarters and multiple listings and deal books to address incompatible standards will cut into savings, at least in the short term.
If companies and their products are integrated globally, then it makes sense to integrate stock exchanges globally. This is mirroring in the financial world what is going on elsewhere. Tabb and others observe that the trends that make this merger and other exchange pairings necessary — namely the migration of trading away from exchanges — also make one wonder whether we need exchanges at all. One argument in their favor is that the more trading happens away from the exchanges, the more fractured, less transparent and less efficient it is.
Without the rules and standards that exchanges have developed over time in reaction to abuses — and lacking someone at the exchanges whose job it is to keep an eye on daily trading activity — it could be that much easier for rogue traders to engage in illegal activities, and for legitimate traders to use techniques that are technically legal but still undermine the markets, particularly for small investors, experts note.
At the very least, it would mean that the order an investor put in to a broker to buy or sell shares of Coca-Cola would probably never leave the brokerage house, and an investor might pay a few cents more or earn a few cents less per share than he or she would if the order went to an exchange. The combination makes sense for all of our constituencies. The tie-up comes amid a major shakeup in the world's exchanges.
Technology is driving down the cost of accessing markets across the world and has led to the rise of multiple new trading platforms. The big players are looking to shore up their positions through consolidation. On Monday Adena Friedman, chief financial officer, resigned abruptly amid speculation the exchange may also be a merger target.
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