- Summary: Both the NYSE Group Inc. (NYSE:NYX), owner of the New York Stock Exchange, and Nasdaq Stock Market Inc. (NASDAQ:NDAQ), have been trying to acquire an increased share in their European counterparts. NYSE Group announced in June a proposed merger with pan-European exchange operator Euronext NV. Not to be outdone, Nasdaq Stock Market Inc. has bought 25% of London Stock Exchange PLC and could try to buy the rest as early as next month. Both of these possible deals need shareholder approval that would come easier if the U.S. exchanges' stock prices rallied from recent slumps. NYSE shares are down about 31% from their high in March and about 6% since the Big Board launched its merger bid for Euronext while Nasdaq shares, have slid about 35% since mid-March, just after it made its first bid for LSE. The global mergers intensify a long struggle between the two exchanges for market share in the U.S. On Wednesday, Nasdaq said its market share of trading in NYSE-listed stocks increased to 12.5% in August, up from 10.8% in July and 4.8% in August 2005. Each percentage-point gain in market share that Nasdaq manages to grab from NYSE adds about a penny a share to Nasdaq's earnings, estimates Roger Freeman, a Lehman Brothers analyst. The same shift of one percentage point takes away about two cents a share from NYSE's projected earnings of $2.22 next year, he adds. The implications of the competition may be wider. Continued share losses at NYSE could force the Big Board to "sweeten its offer" for Euronext. In that scenario, Euronext could push for a bigger stake in a combined company to compensate for the risk of accepting NYSE shares that have declined in value.
- Comment on related stocks/ETFs: In yet another attempt to diversify, Nasdaq Stock Market Inc. recently announced plans to open an options market. For more on the companies that run the U.S. exchanges, read Mark Mahorney's piece.
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