Yesterday it was announced that the parent of the New York Stock Exchange (NYSE Euronext) and Germany’s Deutsche Boerse (DBOEY) were combining to create a singular company. The new company will have dual headquarters in New York and Frankfurt. The NYSE CEO Duncan Niederauer will be the CEO and the DBOEY CEO will be chairman of the board. At this time, a name has yet to be announced. The issue of the name is getting a lot of attention, as the NYSE is a historical American brand.
In addition to the name being a source of controversy, there are many people who are outraged with this deal itself. Though the NYSE’s Niederauer, claims that this deal is a merger, opponents see this as an acquisition of an American historical institution by a foreign company. The DBOEY will own 60% of the new company (because of their larger market cap) and will receive 10 of the 17 board seats.
Technically that means that at some time in the future, if the majority of board members of this new company decided for whatever reason to close the NYSE’s location on Wall Street, they could do so. The NYSE has been in existence at its present location since 1792.
There isn’t a shortage of people who are not in favor of this deal. Today Donald Trump was quoted as saying, “I think it’s ridiculous that this country allows Germany to buy our NYSE, that’s my opinion. I think it’s another black eye for the US.”
CNBC Mark Haines even introduced the NYSE CEO Niederauer on live television as, “The man who sold an iconic American institution to a bunch of foreigners.”
So why is this deal happening if so many people are against it?
As always… for the money. The NYSE is supposedly going to save $300 million by merging with the DBOEY and their stock is up 10% since the deal was announced.
Niederauer claims this deal is important for NYSE to remain competitive in the global market place. He said in his CNBC interview today, “The economics of stock trading are more competitive then in other parts of the business. So if you think about this combination, our brand on the listings and equity side, our leadership in the US options business, our growing tech services biz, our combination of strength in derivatives and you got DBOEY in post trade services and analytics business. I don’t see how you can build a more diversified exchange group.”
He continued, “I have never thought the future of exchanges was just about trading equities. In the developed market it’s an intensely competitive business. I think that positions us to be as big as some the big guys we compete with globally, it’s the United States and New York leading from the front again, and create the first diversified exchange and it gives us opportunity to control our destiny going fwd.”
As for the future of the NYSE trading floor, he stated, “This place is going nowhere. Under no circumstances are we closing the floor here.”
What do you think of this deal? Do you think this is a necessary arrangement in order for the NYSE Euronext competitive in this new globalized world? Or, do you believe that this deal is “another black eye for the US,” as Trump said. Please leave your comments below
