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By Jonathan Chen

Who's next in the exchange merger mania we're seeing?

Shares of Nasdaq OMX (NASDAQ:NDAQ), CME Group Inc. (NASDAQ:CME), and CBOE Holdings, Inc. (NASDAQ:CBOE) all rallied yesterday a day after the NYSE Euronext (NYSE:NYX) and Deutsche Börse disclosed they were in advanced merger talks.

Earlier in the week, the London Stock Exchange announced it was merging with the Toronto Stock Exchange to create another trans-Atlantic exchange, one of many. The race has been to tie up with other exchanges across the globe, as exchanges seek to capture options and derivatives trading, the most lucrative form of trading.

Investors are clamoring for another deal in this space, and wondering who makes the most sense. “The CME, the CBOE and Nasdaq are now forced to make their next move,” said Patrick J. Healy, the chief executive of the Issuer Advisory Group.

NYSE Euronext and Deutsche Börse said Wednesday that if the two companies were to merge, they would see approximately $411 million in cost savings.

“These are essentially plumbing systems,” Niamh Alexander, an analyst at Keefe, Bruyette & Woods, said. “You typically need only one set of pipes to carry out trades.”

Despite some concern that the deal would make America look weak having a foreign company own the NYSE, Mayor Michael Bloomberg thinks it's a positive. “I think it's very good for New York,” Bloomberg said. “You'll have the two strongest stock exchanges together, and it's going to give us access to Europe and them access to the United States in a ways that some of our other competitors, like London, will not have.”

Nasdaq is small enough to be acquired, with a market cap of $5.5 billion. The CME is the tougher one to absorb, with a market cap of $20 billion. The Nasdaq and the CBOE are seen as a strong marriage, with the Nasdaq getting into the lucrative options and indexes business. Due to CME's size, it's going to be difficult to find someone who can take it over, so the most likely scenario is CME is the acquirer. The Hong Kong Exchange could be a potential target, as well as exchanges in other emerging markets, like Brazil and India.

Source: Who's Next in Exchange Merger Mania?