NYSE, Deutsche Boerse Merge

Deutsche Boerse and the New York Stock Exchange have merged, creating the biggest stock exchange in the world. Reuters has more about the $10 billion deal:

The new company, which has yet to be named and will be incorporated in Amsterdam, will be headed by NYSE Chief Executive Duncan Niederauer, with Deutsche Boerse Chief Executive Reto Francioni taking the post of chairman, the companies said.

Deutsche Boerse shareholders are set to own 60 percent of the combined company with NYSE Euronext shareholders taking a 40 percent stake, the companies said.

Each NYSE Euronext share will be converted into 0.47 of a share in the new holding company. Deutsche Boerse shares will be converted into one share each of the new company. The deal is expected to yield synergies of 300 million euros ($405.2 million), the companies said.

The New York Times writes that the deal has spurred worries about New York’s status as a global financial capital:

The union of the operators of the New York Stock Exchange and the Frankfurt Stock Exchange marks the biggest instance of consolidation among exchanges, as established players contend with smaller electronic markets that have seized market share.

By combining, the two companies hope to create a giant among financial markets, allowing investors access to thousands of stock listings in the United States and Europe, as well as options, derivatives and other services. But the deal has also stoked fears that New York and its iconic “Big Board” are ceding prominence as a major financial capital.

Last week, the London and Toronto stock exchanges announced their own merger, and in October SGX, the operator of the Singapore stock exchange, said it plans to buy the Australian Stock Exchange.

Leaders in both companies haven’t agreed to a new name, although at least one US politician wants the name to contain the words “New York,” according to the NYT.

In an economic context, however, consolidation makes perfect sense, writes The Wall St Journal’s James B. Stewart:

…when I first invested in the New York Stock Exchange, I considered it and fellow exchanges to be near-monopolies, able to deliver high profit margins to their owners. But technology and the rise of rivals like the IntercontinentalExchange have demonstrated that geography is irrelevant. Face-to-face market making is a historic relic, one that makes a nice photo opportunity on the trading floors in New York and Chicago, but one that has almost entirely been supplanted by computers. Exchange trading already is evolving into a competitive, low-margin business where low costs and large scale will determine the survivors.

No wonder the world’s exchanges are rapidly consolidating.

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