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Warding
off potential acquirers has come to be the core busi-ness
these days for Clara Furse, CEO of London Stock Exchange (LSE).
Last year, she had seen off the Australia-based Macquarie,
the Germany-based Deutsche Borse and pan-European exchange
Euronext, which have either indicated interest or offered
to buy LSE. And now, in less than four months, she drove off
yet another bidder this time it was NASDAQ, an American bourse.
However, NASDAQ did not give up; it purchased a 15% stake
in LSE and now stands as the largest shareholder and the strongest
contender in the race for LSE. While the string of suitors
and their bidding saga have highlighted the attractiveness
of LSE as a takeover target, market s are hinting at
a broader, more compelling phenomenon of exchange consolidation
that is sweeping across financial exchanges all over the world.
For
good reasons, NASDAQ's bid and its acquisition of a 15% stake
in LSE had been a long time coming. Its origin lies in three
trendsautomation, demutu-alization and consolidation that were
evident in the exchanges worldwide. It all started with the
gradual shift towards electronic trading that had a far-reaching
impact on the economics and operations of these exchanges.
As the users of exchanges, particularly the institutional
investors, became increasingly sophisticated, cost conscious
and were always hard-pressed for speed and reliability in
their transactions, exchanges were forced to take a conscious
measure to reduce human intervention. As a result, they slowly
began moving from traditional trading floors to electronic
trading platforms. During the same period, many stock exchanges
went public. For them it was an attractive way to raise funds
in order to support the automation and expansion strategies.
Exchanges have one by one abandoned their status as clubs
and mutuals and went public. One useful consequence of demutualization
was that it helped to create exchanges with clear governance
structures and a motive to expand. |
