It’s musical chairs, but the this time the outcome really does matter. These are the players gathered in a circle. From America there’s the New York Stock Exchange, NASDAQ and the Chicago Mercantile Exchange. From Europe, there’s Euronext, which owns exchanges in France, Brussels, Portugal, Holland, as well as the London Liffe market, then there’s the Frankfurt based Deutsche Boarse, and the of courses the London Stock Exchange. Waiting in the wings is the Dubai Stock Exchange. Forward wind the clock a few months, and many of the players will have merged, a couple of whoppers will be left, and perhaps some tiddlers settling for left-overs. The prize awaiting the victors will the opportunity to become the IPO home for the new growth companies from the likes of China and Russia, and perhaps they will become new global exchanges for the world’s largest companies. And what will happen to London, for so long the exchange everyone else wanted to court, its boss Clara Furse (pictured) wants it to stay independent? Is this a wise strategy, one doomed to fail, or perhaps worse, a foolish strategy, that if successful will merely see the LSE as a bit player, feeding off scraps?
Its decision time for Euronext Not so long ago it was trying to buy out the LSE, now it has to decide between new owners. It had looked as if Deutshe Boarse was going to win the prize, with many of the Euronext’s leading shareholders wanting to see it pass to German hands. Euronext management were not so keen. This merger would have entailed moving centralised control of the Euronext network to Frankfurt, and job losses would have followed. But then, this weekend, news broke that the New York Stock Exchange has thrown its hat into the ring, and if press comments are any guide has become the favourite.
A NYSE and Euronext merger has many advantages. It will create a single home for companies such as Axa, ING and Philips, which currently have listing on both the New York Stock Exchange and on one of the Euronext exchanges. For another thing, the technology behind the Liffe derivatives market could be exported stateside and lead to the creation of a global derivatives market. And finally, but by no means least, are the wishes of Euronext’s management. The merger with NYSE will see two head offices, one in New York and one in Paris, and the current boss of the European network, Jean Francois Theodore will have a senior role in the merged company.
What will this mean for poor Deutshe Boarse, jilted once again? It was ahead of the game, when it made overtures towards the LSE back in 2004. It was turned down, now it looks as if it will lose out on Euronext, and is in danger of being left up the creek without a paddle.
Perhaps the single most important player in all this is the LSE boss. It sometimes seems as of Ms Furse has a treble barrelled Christian name, for she is often referred to in the press as “The Formidable Clara” Furse. When suitors ask for hand she says she has been saying “non”, “nine” and “get out of here” and on Thursday, when she presents the annual results, she will also be repeating the case for an independent LSE. But NASDAQ now owns 25.1% of the exchange, having bought another 2 million or so shares on Friday, (representing another 1% of the company.) NASDAQ now has enough shares to block a third party buying it out, but is forbidden from making another offer until the Autumn. A lot can change between now and then, maybe “The Formidable Clara” will herself will be regretting her earlier haughtiness, because, who knows, by then maybe NASDAQ may have given up on seeing its advances rejected and gone for a Deutshe Boarse merger, leaving LSE as the spinster left on the rack.
On the other hand, just bear in mid what Suzanne Dence from the IBM Institute for Business Value said recently on the publicatin of tis report “Financial Markets in 2005.” “The big question is not which exchanges are going to win or where these exchanges will be based. The real question is what will exchanges look like in 10 years’ time and will there be any need for them at all#133;While exchanges provide a level of unique value in providing surety about the counterparty that you are dealing with, much of the rest of their service is little more than a glorified Ebay”
Sources
Furse will seek support for staying independent Telegraph
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