Nasdaq, Dubai agree on OMX/LSE

By Anupreeta Das and James Cordahi

NEW YORK/DUBAI (Reuters) - Nasdaq and Borse Dubai agreed to buy stakes in one another in a deal to create a group of exchanges with unprecedented reach, linking the United States, Europe, the Middle East and Asia.

Consolidation among exchanges has so far been mostly in U.S. and European markets, as competition heats up and new technologies allow exchanges to offer trading across borders in a number of sophisticated financial products.

While gaining a key ally in one of the wealthiest areas of the Gulf region, Nasdaq in a single stroke achieved its prized goal of controlling Nordic markets operator OMX AB and unloaded its London Stock Exchange Plc stake, a leftover from two previous failed bids to expand abroad.

"The race to develop the global exchange is certainly apparent," said Larry Tabb, a consultant with financial research firm Tabb Group. "The acquisition of OMX enables Nasdaq to move into less competitive and more lucrative markets."

The deal unveiled on Thursday also brings the Middle East into play. Borse Dubai's actions brought a swift response from regional financial rival Qatar.

Qatar said it had bought a 20 percent stake in the LSE through the Qatar Investment Authority (QIA) and urged OMX shareholders to take no action on the Dubai/Nasdaq offer. The QIA also said it bought 9.98 percent of OMX.

Separately, private equity firm Carlyle Group said on Thursday it was selling a 7.5 percent stake in itself to an Abu Dhabi investment arm for $1.35 billion.

Borse Dubai, a holding company formed last month to promote investment in two Dubai exchanges, has now ended its takeover tussle with Nasdaq over OMX. Instead, it will buy 20 percent of Nasdaq itself, making it the single-largest shareholder.

U.S. politicians immediately expressed concern about the deal, which for some recalled last year's controversy over Dubai Ports World's plan to acquire six major U.S. ports.

U.S. Sen. Christopher Dodd, who heads the Senate Banking Committee, said the deal requires a "careful review" to ensure there are no national security implications.

Nasdaq Chief Executive Bob Greifeld told analysts on a conference call that he does not anticipate regulatory hurdles to the deal because Borse Dubai's voting rights in Nasdaq will be "severely restricted" at 5 percent.

"It is up to us to prove (to regulators) how good this deal is for New York and the U.S.," he said.

Greifeld, however, had support from New York Mayor Michael Bloomberg, who said the deal gave the city a leg-up on European competitors.

Although the deal must undergo the appropriate scrutiny, "I hope that that discussion does not devolve in the kinds of demagogic attacks that could cost Americans jobs and threaten New York's place as the financial capital of the world," he said in a statement.

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