The world’s stock exchanges, once bastions of nationalist pride, are following each other into international mergers and partnerships. The physical independence of great stock-broking centers such as London, Paris, Berlin and even Chicago and New York is about to disappear. The truth in real terms, however, is that their actual independence has been slipping away steadily over the last ten years.
The latest manifestation of the agglomeration of stock exchanges is the New York Stock Exchange’s bid to merge with Euronext in a $10 billion deal that will unite the main stock trading centers of Paris, Brussels, Amsterdam and Lisbon with the largest US exchange. Perhaps just as significantly, Euronext includes the London International Financial Futures Exchange (Liffe). Coupled with NYSE’s own futures and options business, the new exchange would more than rival the currently still dominant Chicago futures exchange.
Analysts point out that if the Euronext-NYSE merger goes through, it will leave the German Borse and the London International Stock Exchange isolated. The German Borse has, at various times, tried to join London and Euronext. London, for its part, has in the past flirted with Amsterdam and has had the NYSE’s high technology stock rival NASDAQ build up a key 25 percent stake in it.
To the shareholders in these individual stock exchanges, the merger and takeover activity is of course of consummate interest; they want to be able to sell their shares for the best price. The German Borse may yet try to top the merger terms between NYSE and Euronext. However, to the mass of international shareholders who trade on these exchanges, the place where their buy and sell orders are executed is of less and less relevance.
Not all shares of course are traded on every stock exchange. But the Internet has made this virtually irrelevant. Online trading platforms mean that investors are increasingly able to buy and sell any share on a single platform, in some confidence that their orders will be executed at the best price in the relevant exchange.
However, despite this increasing investment fluency, the existence of local exchanges will remain important for some time, for two reasons. First, local brokers and analysts are expected to have the best knowledge and understanding of stocks that are unique to their particular geographical exchange. Secondly, all important financial dealing regulations are still country-based. This latter will change but it will take time and bitter experience before the regulation of international online trading systems is on a par with the current best national regulatory practice.
The current developments will inevitably engulf Arab exchanges. Even a single GCC market is unlikely to offer the depth and liquidity to rival the new transcontinental behemoths. There will be some who will regret the independence loss for new and confident stock markets but the reality is that investment is now global and individual country-centric stock markets are on the way out.
