Big bourses get bigger

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Big bourses get bigger

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Germany’s Deutsche Boerse is to take over NYSE Euronext to create the world’s largest exchange operator.

Spoken of as a merger, the deal is effectively a takeover; 60 percent of the new company will be owned by the German company’s shareholders – though many of them are Americans – and 10 of the 17 board members will come from Frankfurt.

The group will have operations in Germany, France, Britain, Amsterdam, Portugal, Belgium and the United States and headquarters in both New York and Frankfurt.

New York’s Mayor Michael Bloomberg said: “It’s very good for New York. This is one of the better things for New York because 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 way that some of our other competitors, like London, will not have.”

However market regulators will look closely at the deal before approving it. Exchange users have raised concerns the latest rash of takeovers will limit competition.

Also waiting approval are the Singapore Exchange’s bid for Australia’s ASX and the London Stock Exchange’s move to buy its counterpart in Toronto, Canada. Both deals have run into foreign ownership concerns.

The exchanges are consolidating because they face intense competition in their traditional stock-trading business from younger trading platforms geared toward today’s increasingly dominant high-speed electronic traders.

Among the competition issues – the fact that together Deutsche Boerse’s Eurex unit and NYSE Euronext’s London-based Liffe division would dominate European exchange-based futures trading, with more than 90 percent overall.

In an attempt to win over sceptical Australian politicians, the Singapore Exchange has made changes to its bid for ASX, allowing more Australian directors onto a combined board.