Mergers likely amid turmoil at US exchanges
By Vincent Boland in New York and Jeremy Grant in Chicago
Published: December 1 2003 4:00 | Last Updated: December 1 2003 4:00
A wave of links between US and foreign securities exchanges that could lead to acquisitions and mergers is about to get under way, according to industry executives and consultants.
The prospect of links has been made more likely by the turmoil in which many US exchanges find themselves after a year of upheaval at the New York Stock Exchange and other markets. There is also pressure on the Securities and Exchange Commission to allow more competition in stock and futures trading.
Meyer "Sandy" Frucher, chairman and chief executive of the Philadelphia stock exchange, said PHLX was looking for domestic or foreign tie-ups after its members voted last week to demutualise. "The next step is to go out there and assess the landscape and find the right partners to do business with," he said.
US regulators have been reluctant to allow the outright acquisition of exchanges.
Another hurdle for potential buyers is that some exchanges are barely profitable. "I'm not convinced all [the exchanges] are viable in the long term," said Michael Rude, a principal at Capco, a securities industry consulting firm. "If none of them is making money, it's hard to see how one plus one equals three."
There are SEC rules limiting the size of stake an acquirer can take in a securities market. Even so, the industry is abuzz with talk of a fresh round of consolidation that will redraw the US securities market landscape.
Much of the focus on industry consolidation has been on Eurex, the derivatives exchange in Frankfurt that has stirred unease in Chicago with plans to launch a US futures exchange. Eurex, controlled by Deutsche Börse, has applied for a licence to operate a futures exchange. To secure an options licence it needs SEC approval. But it could acquire an existing exchange.
Other possible acquisitions include the Chicago and National stock exchanges. But demutualisation has turned the spotlight on the PHLX, the oldest US stock exchange. Mr Frucher declined to comment on possible partners. But a broker in Chicago said: "The Philadelphia is the most aggressive of all the exchanges in looking for a partner now."
Jamie Selway, managing director at the brokerage firm White Cap Trading and a former chief economist at the Archipelago securities trading market, said the PHLX was "the low-cost entry to the exchange business" for other exchanges looking to acquire a US trading licence in stocks and options. |
