Stock exchange merger trend will end with “three, four” global exchanges

The world is moving into fast consolidation of stock exchanges through mergers and acquisitions among the giant exchanges. London Stock Exchange chief executive Xavier Rolet said: “In five years there will be three, four international exchange groups with global distribution capabilities”, according to a report in London’s City AM newspaper (24 Feb).

African stock exchanges have not announced any changes to their style of operations.

The LSE is busy with a £4.3 billion merger with Canada’s TMX exchange. The Ontario Securities Commission chairman Howard Wetson said the regulator would review the value of the deal. In 2010 Canadian regulators blocked mining giant BHP Billiton’s $39 bn takeover bid for Potash Securities.

New York’s NYSE Euronext is planning a $9.5 bn merger with Germany’s Deutsche Boerse, which could face challenges on grounds of reducing competition. According to the report, Rolet said: “There’s going to be big competition issues because, between them, they control 93% of equity and index derivatives in Europe. It cannot be said that this is going to be anything but a monopoly.”

Also complicating the transaction is speculation that US stock exchange NASDAQ is contemplating a rival bid for NYSE Euronext. NASDAQ is valued at $5.7 bn and is worried that it may become a takeover target if it does not grow. The holding company of Chicago Board Options Exchange reportedly said on 23 February that it is open to “strategic transactions” such as a sale or merger with another operator of securities exchanges.

The Singapore Stock Exchange is merging with the Australian Stock Exchange as a growing share of world trading and capital-raising moves to Far Eastern and Chinese markets.

A few years ago South Africa’s JSE Ltd sought to acquire a stake in the Stock Exchange of Mauritius but this was blocked by regulators. Traditionally African leaders and regulators see them as national institutions, preferring sovereignty to liquidity and efficient capital markets. Structures have also been designed to link African exchanges without compromising these principles but these are awaiting funding.

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