Story updated to include additional analyst comment.



) -- Now that

The Nasdaq OMX Group



Intercontinental Exchange

(ICE) - Get Report



their $11.3 billion bid to acquire the

NYSE Euronext


the market will likely seek out a smaller and easier acquisition, such as

BATS Global

, according to industry watchers.

"I am sure they are going to make a bid for BATS," said Alan Valdes of DME Securities, a trader on the NYSE floor. "That is the logical next step for them. I would think a deal would happen before July."

Nasdaq and ICE's abandonment of the NYSE bid puts them at a strategic disadvantage and in a hurry to find a new way to grow, said Jefferies & Co. analyst Daniel Fannon in a note Monday.

"The DOJ's decision leaves Nasdaq in a weaker long-term position versus the other major exchanges globally, in our view," Fannon said in the note. "The most likely scenario is that Nasdaq will continue to look for a partner to expand with and achieve a more competitive scale."

BATS Global, the third largest U.S. exchange operator, filed for a

public offering to raise capital

on its own exchange last week. The IPO is being underwritten by

Morgan Stanley

(MS) - Get Report



(C) - Get Report


Credit Suisse

(CS) - Get Report

. BATS is considered to be up and coming in the market, is profitable and has been growing rapidly, Scott Sweet of IPO Boutique told


TST Recommends

in an earlier interview.

Another option for Nasdaq may be to partner with an international exchange, said Jones Day M&A partner Bob Profusek. Profusek said that the recent $3.7 billion bid by Canadian banks and pension funds for the

Toronto Stock Exchange

, which has been in merger talks with the

London Stock Exchange

shows what a competitive merger space the market has become.

"It is a sign that Nasdaq is likely to be look for its next move soon and that could mean another merger," said Profusek. "Of course everyone should be looking internationally right now. It makes sense."

Edward Ditmire, an analyst at


added that with the amount of consolidation going on in the industry it is likely that Nasdaq and ICE will both be seen as targets now.

"For ICE the deal was all about derivatives and so they would not be interested in BATS. They are more likely to be looked at as a target by a bigger exchange." said Ditmire. "Down the road Deutsche Börse and the NYSE could pick up ICE. As for Nasdaq, I would expect them to be seen as a target."

Ditmire would not speculate on what exchanges may want to acquire Nasdaq. He said that in the near term Nasdaq is likely to buy back its own shares as it has been doing over the past year.

"The whole thing really surprised me. We didn't expect that the DOJ would make up its mind so soon or that Nasdaq and ICE would move ahead with a bid if there was doubt that the deal would be approved," said Ditmire.

ICE and Nasdaq announced Monday that they had withdrew their bid due to antitrust concerns expressed by the Department of Justice (DOJ).

"The acquisition would have removed incentives for competitive pricing, high quality of service, and innovation in the listing, trading and data services these exchange operators provide to the investing public and to new and established companies that need access to U.S. stock markets," Christine Varney, Assistant Attorney General in charge of the Department of Justice's Antitrust Division said in a press statement.

The decision to withdraw the bid does not come as a surprise for several reasons. Not only did the bid potentially limit the marketplace, but the NYSE board and NYSE shareholders did not seem to consider the bid seriously due to the

amount of leverage

that was involved in the deal. In fact, the bid turned hostile because the board had not held

formal discussions

with Nasdaq and ICE, so they appealed to shareholders.

"I think there was concern by shareholders that this was not an all cash transaction," said Valdes. "The

Deutsche Börse

deal is better in the long run for shareholders."

Calls to BATS and Nasdaq for comment were not immediately returned.

--Written by Maria Woehr in New York.

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