Exchanges Connect

Terry Flanagan

NYSE Euronext and the Tokyo Stock Exchange are the latest exchanges to offer interconnectivity between each other’s trading platforms.

With the global financial markets becoming increasingly interconnected, exchanges and trading venues are looking toward interconnectivity to broaden their reach.

“We are currently observing consolidation and interconnectivity trends in the global financial markets,” Jochen Biedermann, head of international affairs at Deutsche Borse, told Markets Media. “So cross-border relationships are of ever increasing importance in order to keep pace with competitors. However, you may also look at this from a different angle: such cross-border relationships are the basis for innovation and one of the main drivers for building bridges between the national capital markets, facilitating the international flow of investments.”

The mutual connection between the TSE and NYSE is formed between the TSE’s Arrownet and NYSE’s Secure Financial Transaction Infrastructure. Although new services to utilize the new infrastructure are planned for the second quarter of 2012, the connection between the two networks has already been installed and NYSE Technologies, the technology unit of NYSE Euronext, will begin distributing TSE market data shortly.

The announcement is the consummation of an agreement that first originated earlier this year. In March, the companies signed a joint letter of intent to explore options to give the customers of each exchange access to the other’s markets through a network linkage.

The connection is in a line of cross-border partnerships to be formed between exchanges. Deutsche Borse recently announced the formation of a mutual development partnership with the Istanbul Stock Exchange, under which the two exchange operators will work together in several business areas, including the development of new research and technology, assisting each other in marketing efforts, as well as introducing joint indices, in an effort to create a closer cooperation between Frankfurt and Istanbul.

Mexico’s BMV Group is also involved in a strategic partnership with CME Group, with the two originally announcing its consummation in March 2010. Part of the alliance is a north-to-south connection, which allows stateside investors to trade MexDer’s benchmark derivatives contracts, including Mexican Stock Exchange index futures, bond futures and Mexican peso/U.S. dollar futures contracts. In addition to the order routing connection, the agreement also allows for the pursuit of other joint initiatives, including product development, marketing and clearing opportunities. CME is the exclusive provider of derivatives order routing services to MexDer outside of Latin America, and MexDer is the exclusive provider of derivatives order routing services to CME in Mexico.

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