NYSE and Deutsche Boerse poised to reveal deal

NYSE and Deutsche Boerse poised to reveal deal

(Reuters) - Deutsche Boerse and NYSE Euronext are poised to announce a deal to create the world's largest exchange operator, setting aside political issues that still threaten its completion.

Such local concerns over a wave of consolidation sweeping the industry surfaced in Asia on Tuesday. Singapore Exchange tweaked its $7.9 billion bid for rival ASX to allow more Australian directors onto a combined board in an attempt to win over skeptical Australian politicians.

Nationalism has long been one of the biggest hurdles to exchange mergers. The marketplaces are often symbols of national pride and important to attracting business and capital.

Despite this, key details of the Deutsche Boerse and NYSE tie-up have been hammered out and a definitive deal is to be announced later on Tuesday, with a press briefing planned for 1500 GMT, several sources familiar with the plans said.

Earlier Deutsche Boerse's powerful supervisory board met to discuss the deal, a member of the board told Reuters. But several thorny issues have yet to be addressed, adding to concerns on both sides of the Atlantic.

The companies are likely to avoid delicate issues such as a name, and specific details about where job cuts would fall as a way to keep national and political forces on board.

Deutsche Boerse and NYSE Euronext declined to comment.
Regulators are paying close attention to the latest round of deals, including a bid by the London Stock Exchange to take over Toronto Stock Exchange operator TMX Group.

Exchange users have also raised red flags over the proposed deals, which they fear will limit competition.

"Euronext and Deutsche Boerse are still screwing us on fees for clearing, the closing auctions and small and mid-cap trading -- the areas where they still have virtual monopolies," said the head of markets at a large European bank, who declined to be named. "A merger is concerning because together they will be more powerful and better placed to protect these monopolies."

The LSE deal with TMX has already run into foreign ownership concerns in Canada.

But despite rumblings about Middle Eastern ownership in Ontario, LSE shareholder Borse Dubai, which is owned by the ruler of the Gulf Arab emirate, has not been asked to trim its 20 percent stake, a source familiar with the matter said.

Singapore Exchange's willingness to give ground and award an equal number of board seats to Australians and Singaporeans in the combined entity shows how local sensibilities are being overcome as the pressure to consolidate rises. The value of SGX's offer has not been changed under the new proposal.

"All the resistance ... has been political. The steps taken today should address some of those political issues," said Mark Nathan, portfolio manager at Arnhem Investments.

WHO NEXT?

The Real Reason Germany Wants to Buy the NYSE

February 15, 2011 | From theTrumpet.com
The writing is on Wall Street.

It will be a day that will go down in infamy. The biggest symbol of America’s economic might—the preeminent institution of Anglo-Saxon financial domination—is about to be sold.

And to a German rival.

What is happening to America? Has it really lost so much economic strength that a company from a nation once bombed to rubble is now purchasing the institution that helped raise the funds to make America’s war effort possible? It should be the New York Stock Exchange doing the taking over, not being taken over.

When the bell chimes for the last time at American-owned 11 Wall Street, it will be an ominous, portent-filled day for the country. But probably not for the reason you think.

No other institution represents America like the New York Stock Exchange. It is the home of capitalism. And through the years, by and large, it has served America well. No other country in the world has generated so much wealth so quickly. Sure the super-rich have a disproportionate share of it, but knock capitalism as you will, it has also generated the largest middle class in history.

Throughout most of its 272 years, the New York Stock Exchange has also powered the growth of exceptional American corporations, connecting them with deep pools of financing to power rapid expansion—and just as importantly, punishing those companies that refused or were unable to adapt and innovate. For better or worse, it is the tool that has helped keep American companies sharp, competitive and accountable.

And now, the nyse is dying a very capitalistic death.

American media is selling the story as a merger of equals. The new combined company will be the world’s largest exchange group by revenues—and be valued at over $25 billion. The chief executive officer will come from the nyse group, while the chairman will come from Deutsche Börse. The board of directors will be split 50/50.

But that is where the equality ends.

As German media bring out, it is a take-over through and through. The “merger of equals” stuff is window dressing to keep Americans happy. Sixty percent of the new merged company will be composed of shareholders of Deutsche Börse—giving them the voting power. The current plans may call for New York to remain a head office to supplement Deutsche Börse’s regional hubs in Frankfurt and Paris. But the reality is that both Paris and New York will become little more than token headquarters for the new company.

“There is going to be no ‘triangle concept’ here,” one source told the Financial Times.
The only triangle concept will be that of a pyramid—with Frankfurt on top. “New York is going to be important, but it’s not the financial center,” says Michael La Branche, a member of a family-run firm that has traded on the floor of the nyse for 87 years.

But even before the merger, about half of the nyse group’s shareholders were already European. In 2006, nyse merged with Euronext, consolidating New York with exchanges in Paris, Brussels, Amsterdam and Lisbon, along with a futures exchange in London. Now if the Deutsche Börse deal goes through, U.S. shareholders may own less than one quarter of the new company. Europeanization of the board of directors will thus be all but impossible to stop too.

The baton of economic leadership is being passed again: From London to New York in 1919; and now from New York to Frankfurt in 2011.

According to some experts, U.S. regulators most likely won’t be able to block the nyse sellout either. Just a few years ago they approved the nyse merger with Euronext. Plus, as the Financial Times brings out, there is “‘good support’ at the highest political level in Germany” for the deal. So U.S. regulators would risk offending an important trade partner and ally. Also, the German government has said that since the two companies are private, the German government will only have a “limited” role in the new entity.

But as our 2006 article “Will the U.S. Lose the NYSE?” asked, “What if relations between America and Europe were to become strained? Is it unrealistic to be worried that foreign interests, in a position to sabotage America’s largest stock exchange, would be tempted to do so?”

Even beyond just sabotaging markets, think of all the data on U.S. companies that foreign interests would be able to mine. Already the nyse sells high-speed access to its computers to hedge funds so they can trade a fraction of a second ahead of regular customers, according to the Daily Finance.

Yet here is perhaps the most ominous part about the deal.

The Germans probably don’t even want the New York Stock Exchange!

For all the patriotic flag waving that has ensued over the loss of the nyse, the truth is that it has been in dramatic decline for decades. Scandals have shattered its reputation, and its profitability is shrinking. The last few years were especially devastating. After the Wall Street meltdown in 2008, even Americans disparage it. In 2005, it handled 80 percent of all trading in stocks it listed; now it handles less than a quarter. As a public company, its stock has plummeted 64 percent since it was listed.

Its business model is broken too. With the march of technology, there is nothing New York does that cannot be done elsewhere for less: less cost, less regulation, and less taxation.

The sad, simple truth is that New York is no longer the coveted economic crown jewel it once was. It is more like tarnished costume jewelry—pretty to wear, but not worth much.

German companies don’t even bother listing in New York anymore. Deutsche Telekom was the latest to pull out on June 18. On June 4 Daimler called it quits. Of the 11 firms on Germany’s dax index (its biggest blue-chip companies) once listed in New York, only four still think it is worth the effort.

For Deutsche Börse, the real prize is in what nyse Euronext owns—with the emphasis on Euronext.

In 2006, the nyse and Deutsch Börse fought over control of Euronext, which owned the Paris, Amsterdam, Lisbon and Brussels stock exchanges as well as a derivatives exchange in London. As we wrote in 2006, at that time Deutsche Börse officials touted the potential Euronext tie-up as the creation of a “truly pan-European exchange organization” and “significant step forward in the integration of European financial markets” (emphasis mine).

New York won the battle when it thwarted Deutsch Börse and merged with Euronext. Five years later, Deutsch Börse looks like it is about to win the war. Deutsche Börse is about get Euronext after all—and the nyse, for whatever that is worth.

And from Germany’s perspective, it couldn’t have come at a better time. With much of the periphery of Europe in economic crisis, Germany is pushing for greater economic union—on its terms. In return for bailout money, Germany is forcing indebted countries to turn over national sovereignty. Gaining ownership over the largest stock exchanges in Europe will just add additional firepower to Germany’s already impressive financial weaponry. In the years ahead, the European Union is set to become a much more German-looking institution.

If this merger goes through, the stock exchanges in Amsterdam, Paris, Lisbon, Brussels, Frankfurt and nine other European countries will all fall under control of Germany’s Deutsche Börse. And that is not all.

The Deutsche Börse will also gain control of the former Euronext derivatives unit Liffe. Once combined with Deutsch Börse’s derivatives units, the new company will dominate the global derivatives market, which the Bank of International Settlements estimated at an astounding $1.28 quadrillion notional value in 2008.

But if Germany isn’t really even interested in the New York Stock Exchange (except for maybe its little remaining prestige), what does that say about America? It means America is no longer the preeminent economic superpower it thinks it is.

“This will further confirm in the minds of the world political and financial leaders that gaping U.S. budget and trade deficits, and all the foreign borrowing and high unemployment that results, are significant attributes of an economic superpower in decline,” says Peter Morici, a University of Maryland economist.
Morici is right. Americans sit and talk about patriotism and about how bad it is that one of our icons should be sold, but we are missing the bigger point. America is falling so fast that its most famed financial institution is at best a side asset to Germany.

America is rapidly following Britain’s footsteps to becoming a second-rate power in a third-rate financial position bordering on untenable. Stock exchange or no stock exchange, Americans should be scared silly of ending up like the Brits. And both should fear the fate of a much earlier power: the doomed kingdom of Belshazzar.

It read something like this: Mene Mene Tekle Upharsin ….

Americans need to read the writing on the Wall Street. You know what happens next.

GO GERMANY!!!!!!!!!!!

As German media bring out, it is a take-over through and through. The
“merger of equals” stuff is window dressing to keep Americans happy.
Sixty percent of the new merged company will be composed of shareholders
of Deutsche Börse—giving them the voting power. The current plans may
call for New York to remain a head office to supplement Deutsche Börse’s
regional hubs in Frankfurt and Paris. But the reality is that both
Paris and New York will become little more than token headquarters for
the new company.

Why are they so afraid of giving the American people the "TRUTH"????

The Deutsche Börse will also gain control of the former Euronext
derivatives unit Liffe. Once combined with Deutsch Börse’s derivatives
units, the new company will dominate the global derivatives market,
which the Bank of International Settlements estimated at an astounding
$1.28 quadrillion notional value in 2008.

Awesome!! the derivatives is so FULL of illegal activity...hope Germany can clean it up!!