New York, German exchanges in merger talks

NYSE Euronext, the operator of the New York Stock Exchange, confirmed Wednesday it is in advanced merger talks with Deutsche Boerse, which runs Germany's largest exchange, based in Frankfurt.

The NYSE said no agreement has been reached on the proposed all stock deal, but that Deutsche Boerse would hold 60 per cent of the combined company.

The report came one day after the TMX Group, operator of the Toronto Stock Exchange and the Toronto Venture Exchange, announced an agreement to merge with the London Stock Exchange Group.

If it happens, the German-American deal would create the world's largest exchange operator by revenues and profit, NYSE Euronext said.

"This transaction creates a group that is both a world leader in derivatives and risk management and the premier global venue for capital raising," NYSE Euronext said in a statement on its website.

The combined group would have dual headquarters in New York and Frankfurt. The chairman would be Reto Francioni, based in Frankfurt, and the CEO would be Duncan Niederauer, based in New York. NYSE Euronext said it expected the combined businesses would become a new legal entity incorporated in the Netherlands.

The NYSE estimated the merger would results in cost savings of more than $400 million.

More mergers predicted

Louis Gagnon, associate professor at Queen's University School of Business in Kingston, Ont., said the two proposed mergers show how strong the incentives are for further consolidation, in order to cut costs.

"This is not about to stop," Gagnon told CBC News.

"There will be more," he said. "Perhaps the next one will be [London and Toronto] and an exchange in Asia. Think of that, how incredible it would be to operate a market that would never stop working, on the 24-hour clock.

Aite Group analyst Simmy Grewal also predicted more mergers may be on the way.

Shares in other exchanges jumped on the news. The Nasdaq OMX Group, the IntercontinentalExchange and CBOE Holdings — operator of the Chicago Board Options Exchange — all gained more than four per cent. The CME Group, owner of the Chicago Mercantile Exchange, rose one per cent.

NYSE Euronext operates the New York Stock Exchange and markets in Amsterdam, Brussels, Lisbon and Paris as well as the NYSE Liffe derivatives market.