Negotiating A Path Through Exchange Mergers
Despite the recent failed attempts of NYSE Euronext and Deutsche Börse and the London Stock Exchange Group and TMX Group to join forces, it seems that exchange mergers are all the rage these days.
Notwithstanding a dip in equity trading volumes since the global financial crisis started to take hold, exchanges are becoming ever more attractive due to regulators forcing derivatives trading on to bourses—and boosting revenues for exchanges in the process—and the advent of high-frequency trading, whose computerized algorithms make up an ever-larger proportion of the order flow.
However, this merger activity can initially play havoc for the customers of exchanges. Technology consolidation, data center migration and market co-mingling are all potential by-products of an exchange tie-up.
“If you are a business needing to connect to an exchange or review your existing connections, it can be difficult to understand the best course of action when faced with a merged exchange situation,” said John Owens, vice-president of exchanges and ECNs at Transaction Network Services.
“The recent spate of stock exchange mergers can create challenges for firms. Identifying what needs to change can be the simple part. It is the execution and implementation of the changes that can be a costly and time consuming exercise.”
TNS offers a service that allows customers to securely connect to the merged trading venue, allowing them to obtain financial markets data as well as trade through its Secure Trading Extranet platform. TNS also offers IT adaptation systems and provides fast, secure low-latency connections in over 60 countries across Europe, North America and Asia-Pacific.
The original 2007 Markets in Financial Instruments Directive reforms in Europe triggered these recent attempts by exchange groups to club together—as incumbent bourses like the LSE lost its monopoly grip of UK equity trading—to fight off the challenge of cheaper pan-European multilateral trading facility upstarts such as BATS Chi-X Europe and Turquoise.
“Change in the industry is good,” added Owens. “We encourage firms to review their connectivity options and to investigate the opportunities on offer by connecting to a robust network like TNS, where headaches can be eliminated.”
CEDX opened on 6 September, offering contracts on Cboe Europe single country and pan-European indices.
The MOU covers certain security-based swap dealers and participants.
Equity underwriting on European exchanges rose 70% in the first half.
The analysis is based on transactions publicly reported by 30 European APAs and venues.
A similar service is available on the BIDS platform in the US equity market.