Wednesday’s announcement that government-owned Dubai Stock Exchange (Dubai) bought 19.9% of Nasdaq and 28% of Nasdaq’s LSE holdings gives the US electronic exchange the opportunity to strike a merger deal with LSE, according to Larry Tabb, CEO and founder, TABB Group. This is the only way Nasdaq can match the branding power of NYSE Euronext, he says.
Nasdaq currently lacks the financing to pay LSE's asking price, making LSE reticent to talk with Nasdaq about an acquisition. But Dubai's deal "frees up a significant amount of cash for Nasdaq, prevents NYSE Euronext from taking over LSE (which would make NYSE Euronext virtually unstoppable), and takes the pressure off both LSE and Nasdaq so they can actually sit in the same room together to forge an effective strategy to compete with NYSE Euronext," comments Tabb.
A "price war" on the order matching side is driving US exchanges to expand into more lucrative markets including Europe and Asia, explains Tabb. Currently, the BATS ECN is paying people to trade NYSE-listed shares, he points out.
NYSE Euronext has a "tremendous headstart" in the drive to develop a global exchange, but possible outcomes of Wednesday's deal going forward are Dubai acquiring Nasdaq and LSE or one of the two acquiring the other, either one of which would create an effective competitor to NYSE Euronext. "John Thain, look out!" remarks Tabb.