Thursday, February 10, 2011

February 9, 2011, 9:00 pm Mergers & Acquisitions German Börse in Talks to Buy the Big Board

Traders at the Frankfurt Stock Exchange in Germany, whose owner is negotiating to purchase the New York Stock Exchange.Marius Becker/DPA, via Agence France-Presse — Getty ImagesTraders at the Frankfurt Stock Exchange in Germany, whose owner is negotiating to purchase the New York Stock Exchange.
9:00 p.m. | Updated
The New York Stock Exchange, a symbol of American capitalism for more than two centuries, may soon have new owners — in Europe.
The exchange, facing pressure from electronic upstarts that have taken business away from it, said on Wednesday that it was in advanced talks on a merger with the operator of the Frankfurt Stock Exchange. A deal would create the world’s largest financial market, with a presence in 14 European countries as well as the United States.
A merger would potentially let customers trade stocks in New York, options tied to those shares in Paris and derivatives linked to them in Frankfurt.
A combination, after the mergers of other exchanges, would be another illustration of how globalization and technology have changed marketplaces. The New York Stock Exchange is a giant among exchanges, yet in a world of around-the-clock trading and rapid-fire algorithmic programs, its significance to investors has diminished. Once known for chief executives who were prominent cheerleaders for the stock market, the exchange now has a more muted public presence.
While the ringing of the opening bell every morning and images of anxious or joyful workers on the trading floor represent the stock market to millions of people, increasingly trades are being executed by computers far from Wall Street, in places like Jersey City and Kansas City.
The Big Board has already undergone a radical transformation in just a few years: from a clubby nonprofit organization where brokers on the floor handled most trades to a profit-making multinational corporation engaged in largely electronic trading. Some 1,300 equities and options traders now work on the floor of the exchange, down from nearly 3,000 a decade ago. As a public company, its stock price has slumped 64 percent from a high in 2006.
So while news of the merger negotiations was the talk of Wall Street on Wednesday, some had already accepted that further change was needed.
“You probably need more consolidation,” said Barry Smith, 44, a financial technology executive, who sat drinking beer with two friends at Bobby Van’s Steakhouse and Grill across the street from the exchange.
Under the terms being negotiated, the New York Stock Exchange — which began in 1792 when brokers gathered beneath a buttonwood tree in Lower Manhattan to trade five securities of the new nation — would still have a headquarters in Manhattan. But the Deutsche Börse would own as much as 60 percent of the new company, which would be incorporated in the Netherlands.
If a deal is reached, it could still face several hurdles, including regulatory and political resistance. New York City leaders have been particularly vocal about maintaining the city’s status as the leading financial capital.
Competition among exchanges has grown more intense in recent years as investors seeking speed, lower costs and greater liquidity have flocked to electronic platforms that pay little heed to financial centers or tradition. Exchanges are under pressure to get bigger to cut costs and invest in technology that will allow them to host as many transactions as quickly as possible.
“There is a race toward exchanges becoming ever bigger,” said Elie Darwish, an analyst at Exane BNP Paribas in Paris. “This would give NYSE Euronext-Deutsche Börse an unchallengeable position.”
Much of the $411 million in expected cost savings from a combination of the New York Exchange and the Deutsch Börse is expected to come from combining the two companies’ technology systems and back-office operations. Fewer than 1,000 job cuts are expected, with less than 100 in New York, said a person briefed on the matter who spoke anonymously because he was not authorized to discuss it.
Still, a merger could raise l questions about the importance of the exchange to the vitality of the financial industry in New York. The role of the exchange’s professionals on the floor may become more limited as a result.
Michael Pagano, a professor at the Villanova School of Business, said those floor specialists could help during times of market stress like the “flash crash” of May. “They could become something like the Maytag repairman,” he said. “He doesn’t necessarily do anything all day, but he’s there when you need him.”
The joint statement by the two companies closely followed the announcement of an all-stock merger of the London Stock Exchange and the Toronto Stock Exchange.
While NYSE Euronext and Deutsche Börse confirmed that they were in “advanced discussions” about a deal, they cautioned that the talks may still fall apart. Deutsche Börse has a history of trying to merge with other exchanges, including the Big Board and the London Stock Exchange, without success.
Still, a merger could be announced as soon as the middle of next week, according to the person briefed on the matter. NYSE Euronext shareholders are expected to receive a roughly 10 percent premium to their shares, this person added.
The last six years have yielded several big exchange unions, including the Chicago Mercantile Exchange’s purchases of the Chicago Board of Trade and Nymex Holdings and the Singapore exchange’s proposed acquisition of the Australian Stock Exchange.
NYSE Euronext itself is the product of the New York Stock Exchange’s takeovers of Archipelago Holdings, which gave it an electronic trading platform, Euronext and the American Stock Exchange.
Wednesday’s announcements will probably put additional pressure on smaller players, like the Nasdaq Stock Market, to seek additional partners to keep up.
Deutsche Börse’s chief executive, Reto Francioni, would serve as chairman from Frankfurt. Duncan L. Niederauer, the chief executive of NYSE Euronext, would serve the same role for the combined company, whose name has not been determined. The names of the local markets, including the New York Stock Exchange, would remain, in part to try to mitigate political backlash.
NYSE Euronext and Deutsche Börse held merger talks twice before, in 2008 and 2009, before resuming discussions again late last year, according to the person briefed on the matter.
David Jolly and Colin Moynihan contributed reporting.
Top Exchange Mergers and Acquisitions Since 2000
Date      Target Name Target Nation Acquiror Name Acquiror Nation Value ($mil)
Oct. 17, 2006 CBOT Holdings U.S. Chicago Mercantile Exchange U.S. 11,065
Mar. 27, 2008 Bovespa Holding Brazil BM&F Brazil 10,309
May 22, 2006 Euronext Netherlands NYSE Group U.S. 10,203
Oct. 25, 2010 ASX Ltd. Australia Singapore Exchange Singapore 8,305
Jan. 28, 2008 NYMEX Holdings U.S. CME Group U.S. 7,555
May 25, 2007 OMX AB Sweden Nasdaq Stock Market U.S. 4,109
Aug. 17, 2007 OMX AB Sweden DIFC United Arab Emirates 3,397
Feb. 9, 2011 TMX Group Canada London Stock Exchange Group United Kingdom 2,976
Apr. 30, 2007 International Securities Exchange Holdings U.S. Eurex Germany 2,821
Apr. 20, 2005 New York Stock Exchange U.S. Archipelago Holdings U.S. 2,259
Source: Thomson Reuters

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Mississauga, Ontario
February 9th, 2011
1:11 pm
So much power and influence being concentrated in so few hands. Anyone who's familiar with Biblical prophecy knows what's coming. And the most frightening thing of all is that they're less than a year away from laying the groundwork for it. And it will all come into being almost overnight, so we won't have time to react. They'll throw the global economy into chaos, then pull a solution out of their briefcase and most of us will agree to it without hesitation because we're so terrified of living on the street and eating out of garbage cans. And then comes the rest, which you can read about in Revelations and Daniel 7. As for us Jews, read Ezekiel 39:28.
February 9th, 2011
1:11 pm
Sad, another sign of globalization, the US is losing it's dominance as a financial center. The lax government regulation and an ineffective SEC, that lead to the financial crisis and ponzi-palooza, has so gravely damaged the reputation of the US market.
Technic Ally
February 9th, 2011
5:09 pm

Hot dog, you will all be Frankfurters now.
February 9th, 2011
5:09 pm
Three words: Monopoly Pricing Power.

Another leg up for the rent-seekers. If household income had kept pace with GDP since 1973, each US family would now earn $ 100,000, not 50,000.

The differnce is going to increased rents levied by the property owners in the forms of higher and higher profits as industry becomes more and more concentrated in very sophisticated ways.

The Tea Party shrieks about an extra 5% in taxes while money every family now pays half their income in increased rent to the rent-seakers. Wake up, middle class!
February 9th, 2011
5:09 pm
You're missing the CME purchase of NYMEX
Chicago, IL
February 9th, 2011
5:09 pm
Buy, they even figured out how to outsource Wall St.
February 9th, 2011
5:09 pm
When two big businesses merge, one usually ends up leading and ruling the other. What is the purpose of such mergers? Synergy? Better share of the markets? Cost-cutting? A bit of those, but the real winners are the CEOs: those taken over get huge severance pays, those taking over get huge compensation increases due to the increae in revenues of the new business resulting from the merger,

The shareholders of the taken over business get more than the shares are worth, and the shareholders of the business that ends up running the show are told that it is such a good deal that they vote in favour of the merger.
The new business usually borrows a fortune to buy the taken over business, but the CEOs are paid according to revenues, not debt increase. Things are a bit different when a simple exchange of shares occurs except for the marvellous benefits accruing to the top executives of both businesses: they remain the same. No one has contradicted me yet on this. I only wish someone could.
San Francisco Bay Area
February 9th, 2011
5:09 pm
Let Frankfurt have the N.Y.S.E, and they can sink it to the floor of the Atlantic Ocean. Not good, but a good start.
glen mills pa
February 9th, 2011
5:09 pm
New Haven, CT
February 9th, 2011
5:09 pm
I don't feel comfortable with this. I'm still not convinced exchanges should be publicly traded to begin with, and now, passing the NYSE to German control? No, I don't like it.
Madison, Wi
February 9th, 2011
5:10 pm
Since we're moving toward an international corporate oligarchy loyal to no nation, maybe it's time to bring back the concept of an international union, I.e., the Wobblies.
February 9th, 2011
5:10 pm
Funny- as the world "gets closer" for a few high and up mucky mucks- we lowly people need to look to our neighbors and band together against forces and organizations that have no stake in our communities or our futures and just see us as "consumers".

Personally I don't trust anyone without local roots at least two generations deep.
February 9th, 2011
5:10 pm

hello new world order...
another dismal prospect to look forward to...
new york, ny
February 9th, 2011
5:10 pm
Stop the talks immediately. We have total jurisdiction, let's enter in asap.
dePaul Consiglio
February 9th, 2011
5:10 pm
An absurd idea. The NYSE is a US institution. It would rob the US of its identity, and do great harm to the economy of NY City.
New York, ny
February 9th, 2011
5:10 pm
Sooner or later there will only be oligarchies that are left.
February 9th, 2011
5:10 pm
The NYSE, the US' largest and most potent symbol of capitalism, being run out of Frankfurt. To quote the Wicked Witch of the West, what a world, what a world.
February 9th, 2011
5:10 pm
boynton beach florida
February 9th, 2011
5:10 pm
And how will the SEC and other government agencies oversee this gargantuan entity when they failed miserably to regulate the prior exchange: let's see-- huge profiteering by brokerage personel selling investments doomed at the start (derivatives, mortgages and other creative scenarios); greedy payouts to head of stock exchange; Ponzi schemes by brokerage firms...what's the next bailout for the American honest taxpayer when the US percentage of OUR financial behemoth is 60% owned by non-Americans.
Brooklyn, NY
February 9th, 2011
5:10 pm
Next thing you know they are going to sell Budweiser to some foreign company...unless...
PMGPillai 19235
Mannar Allpuzha Kerala India
February 9th, 2011
5:11 pm
dear on line editor, By merging the stock exchanges of FRANK FURT, NYSE etc if you analyze then one will find that the individuality of the country and its exchange is lost,In its place there will be a common stock exchange fortransactions.Still with its limitations it is better to have a national stock exchange other wise the nation will get merged into a mixture of exchanges and it is likely a unit might take the overhaul control hence it is in national interest to maintain individulity dated Thursday February 10th 2011 time 0429Hrs st AM
February 9th, 2011
5:11 pm
As they say the rich get richer.
February 9th, 2011
5:11 pm
This should simply be blocked by the US Government. First, it is in our national security interests to maintain control of the major stock exchange in the United States by domestic owners. Second, it is too much financial control in one group without adequate oversight. This is simply bad on every level. While I generally would prefer the goverment stay out of market issues, this is a case where they NEED to be involved.
Frank C
Staten Island, NY
February 9th, 2011
5:11 pm
When is the "America For Sale" sign going to be taken down?
We should all go down to the northeast corner of Broadway and Rector Street walk about twenty paces west on the north side of the sidewalk turn to the right look thru the fence at the tomb of Alexander Hamilton and ask him; "Is this what you had in mind"? Then walk another five paces to the west look thru the fence look at the tomb of Robert Fulton and ask him: "Do you think innovation, invention and pride has disappeared in the American soul"?
norman markowitz
new brunswick, new jersey
February 9th, 2011
5:11 pm
The U.S. became the leading creditor nation in the world after WWI. In 1985, thanks largely to the Reagan policies of massive tax cuts, massive increases in military spending and an anti-labor policy that rewarded the export of capital and smashed unions, it became the leading debtor nation in the world Thnks to the Bush policies, the export of capital and the accumulation of debt(which means profit in interest payments for creditors, many of whom today and not U.S.) increased exponentially.
But the American people aren't Wall Street, aren't investors, aren't players except in small numbers in the "great game" of monopoly capitalism. The people and the nation, as Randolph Bourne noted at the end of WWI, aren't the same as the government and the economic interests that control it. Those interests only loyalty is to private profit and the continuation of their wealth and power, which increasingly is against the intersts of the American people and everything that is decent and humane in American culture.
The people can change the system, can even abolish capitalism and replace it with a humane socialism, without damaging themselves or their country. Doing that, I think, may, even present trends, be the only way to save the country in terms of its democratic and egalitarian heritage
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