While the mergers may lead to greater trading efficiencies, Anthony Belchambers, CEO of the Futures and Options Association in London, says that lower trading costs is not a sure thing. “There’s always the tension between return to shareholders and return to customers. Who’s going to get the lion’s share of the savings? Is it going to be shareholders in terms of higher returns, or is it going to be customers in terms of reduced costs?” he says.
So far, clearing members have been quiet about the potential deal, but a merger of this size, similar to CME Group’s purchase of the Chicago Board of Trade and Nymex, holds potential for clearing efficiencies along with fear of increased pricing power by a mega exchange.
The announcements sparked a flurry of action from other exchanges, including a release from BATS and Chi-X to say their merger talks are continuing and a release from the Hong Kong Exchange (HKEx) saying they are open to talks about partnering with another exchange.
Analysts are split on whether we can expect further mergers in the near future. Zubulake holds that this is the end of a wave of mergers while Rowady thinks we may see even more. “Global consolidation of the exchanges has clearly been at play for a number of years. Chances are there are a few other combinations you could envision,” Rowady says.