Don't expect to see a rash of me-too U.S. exchange mergers -- for now, at least.
New York Stock Exchange
jockey for global leadership, investors have been pondering whether the other U.S. exchanges will be forced to do deals to keep pace.
But some observers say that as huge as a Big Board-Euronext merger would be, it doesn't force the hand of players like the
Chicago Mercantile Exchange
Chicago Board of Trade
. That's because the CBOT and the CME have the pricing power that Nasdaq and the NYSE covet.
"This deal is not a domino-inducing deal," said John Lothian of the Chicago-based broker Price Group. "It does create a new global cross-asset-class giant, but it does not create a specific monopoly in any market. Because of that, I don't feel that there are any domino deals that need to be done."
Over the past three months, the world's securities exchanges have scrambled to consolidate. On Monday, the NYSE unveiled a $10.2 billion bid for the Euronext, hoping to beat out a rival bid that Deutsche Boerse outlined Friday. The news about the NYSE offer comes after Nasdaq increased its stake in the
London Stock Exchange
to more than 25% on Friday, giving it the right to block bids from rival exchanges hoping to merge with the LSE.
Earlier this month, the CME was dragged into the merger speculation with the Euronext. The CME could still unveil a bid for the Euronext before Tuesday, when Euronext shareholders will vote on the proposals from the NYSE and the Deutsche Boerse.
But so far, all is quiet from the CME, and investors believe that the CME doesn't have any pressure to jump at a deal with the Euronext -- or any other exchange -- anytime soon.
"The NYSE is the only one that had a sense of urgency," said David Easthope, analyst with the securities and investment group at Celent. "This is the NYSE trying to ride merger momentum and catch the Nasdaq, which is ahead of them in the game."
The CME has long been the favorite among the publicly traded stock and options exchanges. Investors characterize the company's interest rate derivative as a monopoly, and the company has no threat of losing exclusivity of this contract. The so-called monopoly gives the company pricing power that the NYSE and the Nasdaq don't have, and the CME's clout with its products gives the company enough security to stay stateside.
"I think the CME continues to work on their deal with Nymex to get energies listed on the exchange electronically," Lothian said. "The company continues to grow organically."
Meanwhile, the CME's neighbor, the CBOT, already has its own venture with the Euronext, through the Euronext's Liffe platform. The Euronext's Liffe is half owned by AtosEuronext Market Solutions, the outsourced technology firm for the Euronext. The Euronext still owns 50% of the Liffe, but the company is separately run. So investors believe that the NYSE's proposed deal with the Euronext won't effect the CBOT's joint venture with Euronext.
"The CBOT is in a similar position as the CME," said Phil Guziec, equity analyst at Morningstar. "It is a great stand-alone business, and it is not urgent that it consolidates."
Other merger considerations include the regional stock and options exchanges, such as the Philadelphia Stock Exchange and the
International Securities Exchange
"There are some opportunities perhaps if the NYSE decides to get into futures in the U.S., and then there could be synergies by adding other exchanges," Lothian said. "But that would be farther down the line."
Indeed, NYSE chief John Thain seems to have his hands full. On an early Monday conference call with analysts, Thain said the new NYSE Euronext deal would "speak to consolidation of other U.S. exchanges." But he also said that it would take a significant amount of time to consolidate.
"This will fill our plate for a considerable period of time," Thain said.
While the U.S. securities exchanges might take a breather after these deals, Morningstar's Guziec expects the merger dance to continue over the next few years. He envisions a global duopoly within the decade.
"It's just a matter of who pairs up with whom as we get down the path from here to there," Guziec said. "I don't think that kind of change is going to happen this year, but everyone is looking for the right partner. Over the next few years, it is going to be like the three-minute-dating of exchanges."
As Guziec sees it, the Nasdaq's and NYSE's U.S. duopoly will only get stronger if the overseas mergers are pushed forward. "This is just a step from a domestic duopoly to a global duopoly."