Swallow me, swallow

摘要

The endgame is perhaps about to begin for Europe's stock exchanges, in their bid to secure an unassailable share of equity and derivatives trading in the European time-zone. For now, the London Stock Exchange (LSE) is the prize to fight for. America's Nasdaq, heavy in the shares of technology companies, has been talking to the LSE, which is Europe's biggest equities exchange. Deutsche Boerse, based in Frankfurt, and Euronext, which runs the Amsterdam, Brussels, Paris and Lisbon stock exchanges, both need London if they are to beat the other to become the dominant pan-European exchange. Both are building their own clearing and settlement businesses which, they hope, will provide a captive source of profits. Exchanges out on a limb, as the LSE is today, cannot hope to increase profits through higher trading volumes or greater efficiencies. Everywhere they are losing business to big investment banks, which often match buy and sell orders in-house rather than deal through an exchange. As much as 30% of share-trading in Europe is now carried out in-house. Yet the LSE needs profits, now that it is no longer a mutual club of members but a listed company with shareholders to please. A merger with Nasdaq would not add much in the way of profits; neither would a captive clearing and settlement operation. But it would save the exchange from its European rivals. That is why any proposal for Nasdaq and the LSE to merge would probably trigger hostile bids from both Deutsche Borse and Euronext.