The biggest news of the day is merger mania among global exchanges. It could be a great day for shareholders of NYSE-Euronext (NYX), but it looks like another great American institution will be bought by a foreign rival.
It was only a few years ago when the NYSE and Nasdaq were on the warpath. The NYSE bought Archipelago for $10.0 billion on March 7, 2006, and became a publicly traded company the next day. The big deal was the merger with Euronext that created a $27.0 billion global stock exchange. Back then, Deutsche Boerse (OTCPK:DBOEF) complained after dropping out of the bidding, and decided to wait until the right moment to swallow both. The time is now for many reasons.
The day began with the London Stock Exchange announcing its acquisition of the Toronto Stock Exchange for $3.2 billion. Why the sense of urgency? As it turns out, High frequency Trading (HFT) platforms are taking huge swaths of market share from all exchanges.
According to Business Insider:
- NYSE and Nasdaq once controlled more than 80% of trading back in 2001; now neither has more than a 27% share.
- LSE saw its 75% share of trading of U.K. shares in 2009 decrease to 64% last year.
- TSE saw its share of Canadian stocks decrease to 64% last year from 95% in 2008.
The Deutsche Boerse will control up to 60% of the merged company once the dust settles, but maybe it will be a moot point considering current market share trends. Still, I'm a little bummed.