Market Overview

Could We See A Global Exchange? (NYX, NDAQ, CBOE, CME)


NYSE Euronext (NYSE: NYX) has confirmed that it is in advanced merger talks with Deutsche Börse, and would give them a greater presence in the options space.

According to reports, the Deutsche Börse would own around 60% of the combined company. This could lead to a potential antitrust red flag.

Earlier, we saw the London Exchange merging with the TMX Group, in an attempt to create a global competitor to the NYSE Euronext.

We've already seen the NASDAQ (NASDAQ: NDAQ) merge with the OMX Group in Scandinavia to create NASDAQ OMX, as these exchanges continue to merge to seek a bigger slice of the option and equity trading pie.

Diego Perfumo, an analyst at Equity Research Desk in Greenwich, Connecticut, said, "Competition in equity trading is intensifying, so exchanges need to be able to trade more cheaply and at faster speed against alternative trading venues,” Perfumo said. “The LSE and TMX need to become the low-cost provider with the fastest execution platform to compete effectively and hence try to reverse or slow this market-share trend.”

Other names that have been thrown out as potential merger targets are the CBOE (NASDAQ: CBOE), which has been an acquisition target since it went public in the summer of last year. If traders are willing to speculate on who will be the next to be acquired, CBOE looks like the best target, at least for now.

There has been some speculation that the Intercontinental Exchange (NYSE: ICE) could see interest from a company like NYSE Euronext or LSE, but the ICE is almost as big as NYSE Euronext, so there are significant hurdles there.

What does it mean for the granddaddy of them all the CME Group (NYSE: CME)?

With exchanges merging all over the world, could we see one giant global exchange eventually? I don't think so, I think it's just companies trying to create synergies and businesses creating growth for their shareholders. They are looking to win the biggest piece of the pie. This isn't to say that the Bovespa in Brazil, and Bolsa Mexicana de Valores, as well as other emerging market exchanges couldn't consolidate further. As soon as this latest round of mergers is digested, I would expect the major players like NYSE Euronext and the LSE to continue to sweep up as many exchanges under their umbrellas as is humanly possible.

I just don't think we will see one major exchange.

Disclosure: no position in names mentioned

Update: NYSE Euronext opened for trading, up 18% then it triggered a circuit breaker on the back of this news.

Posted-In: Long Ideas News Rumors M&A Trading Ideas Best of Benzinga


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