By Phil Wahba
NEW YORK (Reuters) - Top financial exchanges' recent big-ticket buying spree may finally be grinding to a halt.
After spending billions of dollars widening their global reach, adding new asset classes and acquiring new technologies, several of the top exchanges told the Reuters Exchanges and Trading Summit that they're ready for a pause.
In the past 13 months alone, the former NYSE Group completed its $10 billion merger with Euronext (NYX.N: Quote, Profile, Research, Stock Buzz) and the combined company bid to acquire the American Stock Exchange. In February, electronic exchange Nasdaq acquired Nordic exchange operator OMX in a $4.5 billion deal.
CME Group Inc CME.N, which bought the Chicago Board of Trade for $12 billion in 2007, is now waiting to complete the acquisition of the New York Mercantile Exchange NXM.N.
So most in the industry say they're focusing on integrating their purchases rather than making any new headline-grabbing takeovers.
"While I think consolidation in this space is destined to continue, it is going to be less transformational," NYSE Euronext Chief Executive Officer Duncan Niederauer said. "We are spending a lot of time worrying about putting the pieces together."
Instead, the exchanges are turning their attention toward smaller scale deals to acquire technology that will help them handle ever larger quantities of trades and offer customers more profitable ancillary services.
COMPETITIVE PRESSURES
The latter is becoming particularly urgent given moves to deregulate, such as Regulation NMS in the United States and Europe's Markets in Financial Instruments Directive. Those moves have increased competition, slowing bread and butter sources of revenues like U.S. equities trading and leaving the exchanges little choice but to offer customers new services.
In their core businesses, the exchanges have come increasingly to resemble one another. For example, Nasdaq OMX, NYSE Euronext and Deutsche Boerse (DB1Gn.DE: Quote, Profile, Research, Stock Buzz) now all offer derivatives and equities in both North America and Europe and are set to offer clearing services.
So some exchanges are looking for a technological edge.
In January, NYSE Euronext spent $200 million on Wombat Financial Software to beef up its market data services, which now make up 12 percent of its income. And in March, CME Group snapped up Credit Market Analysis, a provider of credit derivatives market data, to build up its market share in an asset class it has traditionally traded at low volumes.
Nasdaq OMX President Magnus Bocker told Reuters on Friday that his company was planning to build up its portfolio of extra services such as news distribution, press releases and market intelligence.
But consolidation is not the only tool exchanges are turning to. With almost no exchanges left to buy, some major exchanges are opting to build.
Chicago Board of Options Exchange last year launched a stock exchange to allow clients to trade in the stocks underlying the options. And Nasdaq OMX launched a U.S. options exchange in March. Continued...
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