Commenting on NASDAQ’s announcement on 25 May that it will buy Swedish group OMX, a third-party provider of exchange technology, Larry Tabb, founder and CEO of Tabb Group, says, “NASDAQ has been in search of a global alliance for over a year, since they initiated their failed attempt to take over the LSE.”
OMX is important to NASDAQ for three major reasons, he explains: Firstly because they are behind the NYSE group in the push to develop a global exchange; secondly, US equity exchanges are not only lagging behind the rest of the world in terms of volume growth - they are significantly behind. Thirdly, while NYSE and NASDAQ ranked first and third in the world in terms of market cap in 2005 and 2006, according to the World Federation of Exchanges, they ranked 27 and 28 (out of the top 30 global exchanges) in terms of growth. The only exchanges ranked lower in terms of growth are the Japanese TSE and Osaka exchanges. Shanghai, Shenzhen and the Hong Kong exchanges take the top three positions.
"NASDAQ needs to change its momentum," says Tabb. "It lost a year in its attempt to buy the LSE. During this period of time, the NYSE not only announced the Euronext acquisition, they successfully completed it. Also during this time, NASDAQ's debt rating sank and Bob Greifeld's tenure as CEO was questioned. NASDAQ needed a transaction not only to regain momentum, but also to show the world they are on track," he continues.
For NASDAQ, this is a positive move. "While OMX does not have the prestige of LSE or the scale of Euronext, the acquisition gives NASDAQ a position in Europe, restores its momentum and makes it more competitive against NYSE Euronext," notes Tabb. OMX gives NASDAQ a foothold in over 60 exchanges throughout 50 countries as an exchange-technology provider. OMX also has clearing and depository technology, which could enable NASDAQ to set up a clearing corporation in the future, comments Tabb.
NASDAQ says it will pay $3.7bn (?1.87bn) in cash and shares for the Swedish group, which operates exchanges in Sweden, Finland and Denmark and has a 10 per cent stake in the Norwegian Boerse.