After months of excitement, not much has changed in the exchange-consolidation merry-go-round. The SGX/ASX deal got scuttled thanks to Australian political forces playing the "national interest" card. The same could be said for the recently abandoned LSE/TMX deal, though that battle included an interesting twist, with large Canadian banks getting together to counter the British invasion with the creation of the Maple Group.
After a couple of years of slowdown, the exchange consolidation game is in full swing worldwide, with multiple potential mergers on the table. Political pressure is mounting in all of these deals, as cross-border consolidation among exchanges always seems to trigger some sort of patriotic outcry from politicians, market practitioners, and, at times, regulators. We are seeing variations of this political backlash across the three financial markets, involving SGX/ASX in Asia, TMX/LSE in Canada/Europe, and NYSE Euronext/Deutsche Boerse/NASDAQ/ICE in U.S. and European markets.
For the London Stock Exchange (LSE), it has not been fun being the largest equities exchange in Europe over the last few years. Similar to other exchanges with any sort of global aspiration, the LSE faced two somewhat contradictory competitive forces:
1) Global exchange consolidation: Large exchanges have been extremely active, merging with each other to create a diversified, multi-regional mega-exchanges.
With today's official announcement of the Deutsche Boerse acquisition of NYSE Euronext, what was unthinkable even a decade ago may become a reality. While regulatory approval for such a behemoth of a deal is far from guaranteed, the combined entity would certainly put a lot of pressure on other major exchanges with any level of global aspiration. How did we get here, and what is next to come?
Sang Lee is a co-founder and serves as managing partner of Aite Group. Mr. Lee's expertise lies in the securities & investments vertical, and he has advised many global financial institutions, software and hardware vendors, and professional services firms in sell-side and buy-side electronic trading technology, market structure, and retail brokerage technology evolution.