So the LSE/TMX deal is no more – it is deceased, it is an ex deal. Last night the LSE broke off talks with Canada’s TMX group as it became obvious that their proposed merger was never going to get the required support of TMX shareholders. So, if you include recent events in Australia, the latest score is National Self Interest 2 – Common Sense nil. So, what now – is the LSE pining for another deal and will the Maple Group bid go ahead or will it be left to expire (arguably having done its job)? And, what are the implications for BATS/Chi-X and the NYSE Euronext/Deutsche Börse – will their merger deals be left pushing up the daisies too?
It’s interesting that in both cases the management behind the exchanges being “acquired” were 100% behind getting together with a bigger partner so as to achieve operational scale and global reach. This tells you that they understand that, in the exchange world, you simply cannot hold back the tide of globalization, and so it would seem inevitable that they and other national stock exchanges will end up doing deals of some sort or another (and maybe on less favourable terms). As for NYSE Euronext and Deutsche Börse – it’s significant that there has been barely a mutter of nationalistic outcry on either side of the Atlantic. Maybe they get it – and, more importantly, see the potential in being the first exchange group to achieve real global operating scale.
For the LSE it’s not a question of it “being in play” but that it simply has to get bigger and quickly. Given its ambitions in the derivatives arena, maybe Xavier will be booking flights to Chicago in the not too distant future. The CME has been pretty quiet on the merger front since it swallowed its neighbour and arch rival on LaSalle Street – the CBOT. A tie up between the two would create some interesting multi-asset and operational synergies, especially in global clearing and transatlantic trading.
Whatever happens, those exchanges (or their shareholders) that continue to nail their strategy to the perch of nationalism may find that they get left behind and end up scrabbling for partners when all the juicy deals have gone.