| Stock exchanges are no longer just stages
on which other players act out their
rises and falls. Technology, globalisation
and a host of new financial products
have put exchanges under the spotlight as
dramatis personae in an increasingly extravagant,
rumbustious and Machiavellian production of
their own.
Exchanges were traditionally owned by small
groups of 'seat owners', generally the banks or
brokers that traded on them. But one by one
exchanges have shed their mutual status to
become profit-driven, publicly traded entities.
This has destroyed the old set of relations
between marketplaces, their users and their
users' clients and led to a newly competitive
relationship.
Big exchanges in Europe – notably Germany's
Deutsche Börse, the London Stock Exchange
(LSE) and the Paris Bourse – were at the forefront
of demutualisation. And America's big names
have followed suit. First came the Chicago
Mercantile Exchange (CME), which went public in
2002. Since then a series of stock and derivatives
exchanges, including Nasdaq, the New York Stock
Exchange (NYSE) and the New York Mercantile
Exchange, have gone the same way.
One side effect of demutualisation was the
new-found freedom of exchanges to merge.
Horizontal consolidation has occurred at both the
national level – such as the Spanish exchanges in
Madrid, Valencia, Barcelona and Bilbao forming
Bolsa y Mercado Espanoles in 2002 – and at
the regional level. Euronext was formed out of
the merger of the French, Portuguese, Dutch
and Belgian markets, while OMX combined the
Nordic and Baltic countries.
In Europe, regional consolidation has
accelerated and in October 2007 the LSE
bought the Borsa Italiana in Milan for €1.5bn.
The acquisition was a coup for the LSE after
having itself fended off bids by Nasdaq,
Australia's Macquarie Bank, Euronext, Deutsche
Börse and OMX over the past four years. The
resurgent LSE is also looking east – it is planning
to take a large stake in the Singapore Exchange
and has just announced a joint venture with the
Tokyo Stock Exchange to launch a 'risk capital
market' loosely modelled on the LSE's junior
AIM exchange.
Consolidations have also now reached the
global level, with the merger of the NYSE and
Euronext in December 2006 creating the first
transatlantic exchange. The entity is now the
world's largest exchange not only in trading
volume and turnover, but in revenues as well.
And there may be more consolidation to come.
Speaking at a conference hosted by Deutsche
Bank in London in November, the Bombay Stock
Exchange's chief operating officer, Ashok Rout,
said: "I think consolidation will gain pace going
forward. Asian exchanges haven't been involved
in consolidation yet – but all Asian exchanges
have global ambitions now, so we will see some
alignment going forward."
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