Rivals respond to wave of exchange deals

By @ibtimes on

Exchanges left out of the flurry of announced takeovers this week said they are considering striking their own deals or looking to take advantage of the distractions, in early signs of ripples through the world's capital markets.

Exchange operators CBOE Holdings Inc , IntercontinentalExchange Inc , BATS Global Markets and Chi-X Europe all weighed in on Friday, days after two separate deals were unveiled that would see Europeans acquire the New York Stock Exchange and the Toronto Stock Exchange.

On Wednesday, powerhouse exchange operators Deutsche Boerse and NYSE Euronext said they were in advanced talks to merge, just hours after London Stock Exchange unveiled a bid for Canadian market operator TMX Group Inc.

Every exchange that wasn't involved in the two mergers -- the four that were not involved -- had to at lunch on Wednesday be asking themselves, 'Should I be involved in some way?' and calling their bankers and thinking strategically, said Alan Dean, CBOE's chief financial officer.

It has to be a jolt I think for all market participants in this industry, he said at a conference hosted by Credit Suisse.

CBOE, the largest of the U.S. options venues, is seen as a likely takeover target. The other public U.S. operators, ICE, Nasdaq OMX Group Inc , and CME Group Inc , are larger players with histories of being buyers.

One of the mergers would create the world's largest exchange company in Deutsche Boerse-NYSE Euronext, and could put pressure others to keep pace as the companies shift into more profitable derivatives businesses to stave off competition from upstart stock-trading venues.

Jeffrey Sprecher, ICE's chief executive, said his rivals are attempting to muscle their way in or acquire their way into the derivatives space, reinforcing the value of that business.

I bodes very very well for my company to have a lot of these people distracted by with these complicated mergers, these cross-border mergers that are going to involve a lot of regulation and regulatory intervention to get these deals completed, Sprecher told the conference.

We feel very opportunistic right now that we're in an excellent position to take advantage of their downturn.

In Europe, trading venues BATS and Chi-X said they extended their merger talks to secure a deal, which has taken on added importance by the Deutsche Boerse-NYSE Euronext deal.

The venues, which are owned and used by the largest European trading firms, were aiming to strike a deal by February 11, according to people familiar with the matter, but the firms said on Friday talks were still going on.

Chi-X Europe, which is the second-largest European share trading venue, and BATS, which owns BATS Europe, said late last year they were in exclusive negotiations, drawing a line under a bidding process that also involved Nasdaq OMX and Deutsche Boerse.

The merger makes the Chi-X-BATS deal more important, said Richard Semark, managing director of European client trading at UBS.

Our greatest strategic requirement is that competition is sustainable in Europe and that the market moves toward pan-European platforms rather than national ones. To this end, a deal between Bats and Chi-X should ensure viable long-term competition, he said.

Chi-X Europe has a market share of 16.7 percent, after the London Stock Exchange with 23.8 percent. Euronext has 16.1 percent, Deutsche Boerse 11.6 percent and BATS 6.1 percent, according to Thomson Reuters data.

A combined Deutsche Boerse-NYSE Euronext would become the top European trader, with 27.7 percent, and a combined Chi-X-Bats would have 22.8 percent.

(Editing by Steve Orlofsky)

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