The Nasdaq Stock Market agreed Wednesday to pay $652 million in cash for the Philadelphia Stock Exchange, the third largest options market in the U.S. This announcement was no surprise, according to Andy Nybo, senior analyst, TABB Group. "Nasdaq's breakneck efforts to build a global trading platform have seen significant successes, despite its much-ballyhooed failure to buy the London Stock Exchange last year," notes Nybo. Nasdaq's trail of acquisitions include Brut, Inet, OMX, Boston Stock Exchange, and now Philadelphia Stock Exchange. "All of the pieces in Nasdaq's strategy to become a global multi-asset class-trading venue are coming together nicely," continues Nybo.
Nasdaq is not the only exchange searching for the perfect match in a bid to survive and prosper in today's increasingly competitive and consolidated environment. Exchanges globally are actively courting adversaries in an effort to grow and expand. Many, however, are finding this difficult. "The most attractive targets in the exchange industry are quickly disappearing and are quickly marching towards the altar, either by choice or through the prodding of impatient owners holding shotguns to their backs," comments Nybo.
Attention is likely to continue to focus on the derivatives sector, both in the U.S. and abroad. Options exchanges have garnered most attention in recent months but now futures exchanges - the missing link for most exchanges that want to stay ahead of the competition - are coming into the limelight. "Domestic targets are few, with Intercontinental Exchange (ICE) and the New York Mercantile Exchange (NYMEX) sure to be high on the shortlist of attractive opportunities," comments Nybo.
Exchanges with global aspirations and the will to survive are likely to focus on broadening the regions and asset classes they cover and the range of services they offer. However, these opportunities will be fleeting at best, according to Nybo. "Global exchange consolidation has become a massive game of musical chairs. The fastest movers with the biggest cheque-book will ultimately win the game. Those watching from the sidelines risk becoming the next targets as the big get even bigger and the small simply get bought," he says.