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Exchange merger not the main show in town – look backstage

Technological developments in multilateral trading facilities look set to be much more significant than link-ups between private monopoly exchanges.

The struggle over Euronext took a new turn this month when the French political establishment, in the form of the Lachman report, argued that the exchange’s deal with the New York Stock Exchange was not in the best interests of Paris as a financial centre, and Deutsche Börse and Borsa Italiana tried to drive a further wedge into the deal. At the same time investors watched with bated breath as Nasdaq’s moratorium on making any further offer for the LSE expired and Nordic exchange group OMX struck a deal to acquire the Iceland Stock Exchange and its securities depositories.

All these machinations are of obvious interest to shareholders in these businesses but in terms of their significance to the future of cash equities trading they are side shows. The mergers and attempted mergers between these operators of what are effectively private monopolies are more about ownership of monopoly profits than about advancing the way shares are traded.

Questions of ownership of demutualized exchanges are of little interest to users if monopolies are left intact. It’s not to whom they have to pay their high trading costs that bothers traders, it’s the sums that they are paying.

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