What do stock exchange mergers mean for investors and the market?
Monday 14 February 2011 - by John Barker and Vlad Khandros
What do last week's announced mergers mean for institutional investors? At first, not a whole lot. In the past few days we have seen the list of major exchange groups potentially decline by two. On the surface these look like good moves from a diversification standpoint in terms of geographies, services, and asset classes for the exchanges themselves.
It is not clear to us how these deals will bring back market share or even help to reduce market share losses. Dual listings are an opportunity, as they carry additional fees and the ability to trade from time zone to time zone in a more seamless fashion.
But the bigger benefit to the exchanges in doing these deals is improving economies of scale in a very competitive business by consolidating technology and spreading those fixed costs across a larger base of global order flow - NYSE has been public with estimates of approximately $410m in cost savings from this deal.
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