(Part 2 of 2 - The Merger) New York Stock Exchange (NYSE) Could Become German-Owned?

This post will deal with the merger side of the NYSE, and its upcoming Deutsche Boerse Merger

(Refer to Part 1 - Basics of the Stock Exchange)

Duncan Niederauer, CEO of NYSE Euronext, listens to
Reto Francioni, CEO of Deutsche Boerse, via video conference
the day both corporations announced their plans to merge

Introduction

-In the past decade, the NYSE, the last major floor-trader, has been under heavy competitive pressure from the Nasdaq Stock Market Inc., and other electronic trading platforms, due to their faster transaction speeds and lower transaction costs 

-This coupled with the fact that the expansion of trading technology and weaker regulatory rules has made it easier to launch competitive trading platforms (there are now as many as 50 trading venues, compared with fewer than 20 ten years ago) has driven down costs, and drawn fewer private companies into the rigorous process (described in Part 1) of getting their companies listed on the NYSE

-Both NYSE and NASDAQ make their money from listing stocks, executing trades and distributing market data and are fighting to be the place where investors trade.  As the cost of trading stocks has fallen, however, exchanges have become more dependent on volume and have looked more aggressively to consolidate and get bigger

NYSE Merger Timeline 

1971: NYSE is incorporated as a not-for profit corporation

2006: Merger #1 - NYSE + ArcaEx = NYSE Group Inc. 

(creating a for-profit publicly owned company) [NYSE 'Family Tree' - After Merger] 

Market Capitalization After Merger: 

-NYSE acquired its Chicago-based electronic trading rival Archipelago Holdings (one of the largest American electronic trading companies), abbreviated as ArcaEx (which went public in 2004) in a $9 billion dollar transaction, creating the largest ever securities exchange at this time 

-This formed the for-profit publicly-held corporation NYSE Group Inc in a "stock for membership deal" (in which NYSE members, as in the 1,366 seat holders, were given $400 million in cash and 70% of newly issued stock and ArcaEx shareholders were given 30% of newly issued stock, with both now divisions of NYSE Group Inc.), and ultimately equipped the NYSE with new high-tech trading capabilities 

-As a result, the new company was able to create a hybrid market, with both human and computer trading coordinated side by side, that is, one can trade stocks on the NYSE, as well as Nasdaq-listed stocks, bonds, and derivatives (increasingly popular investments not previously offered through the NYSE) through Archipelago's electronic trading system 

-A few days later NASDAQ acquired Instinet (also one of the largest American electronic trading companies) thus bringing the four main American trading competitors down to two now larger competitors

2007: Merger #2 - NYSE Group Inc. + Euronext N.V. = NYSE Euronext

[NYSE 'Family Tree' - After Merger]

-NYSE Group Inc. outbids Deutsche Boerse, to acquire Paris-based Euronext N.V., Europe's largest and most technologically advanced international stock exchange for $9.96 billion - bringing together major marketplaces across Europe and the United States - a milestone in global financial markets

-NYSE Euronext is created, the world's first global exchange (interconnecting exchanges in New York, Paris, Brussels, Amsterdam, Lisbon and London) with the most advanced IT infrastructure and potential, with the time-difference, for round-the-clock trading of major European, global and International stocks.

2008: Merger #3 - NYSE Euronext + American Stock Exchange = NYSE Euronext

-NYSE acquires American Stock Exchange (Amex) paying $260 million in NYSE Euronext common stock

-Significantly enhances its options market, exchange traded funds (ETF's), closed-end funds, structured products and cash equities - in other words, this sets NYSE Euronext as the established leader in global financial-market consolidation, offering the strongest array of products of any global exchange [Detailed Report Here]

  

2011: NYSE Euronext NYSE vs. Chicago Mercantile Exchange (CME)

-Last week, the London Stock Exchange acquired the Toronto Stock Exchange (TMX) for $2.9 billion

-This past Tuesday Deutsche Boerse unveiled a deal to acquire NYSE Euronext for $9.5 billion (combined company would be 60% owned by Deutsche Boerse shareholders, and 40% owned by NYSE Euronext shareholders with dual headquarters in Frankfurt and New York)

-Deutsche Boerse CEO Reto Francioni would become the new group's chairman, and NYSE CEO, Duncan Niederauer its CEO