Summit Notebook

Exclusive outtakes from industry leaders

How to gum up an exchange merger: salt water

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It’s a puzzle M&A bankers and corporate executives have been trying to solve for years: how far from your home market can an acquisition take place and ultimately stumble over cultural differences? It’s a question that looms large as quintessentially Italian automaker Fiat prepares to swallow up Chrysler – inventor of the K-car and the minivan – and which reportedly haunts St Louis-based employees of Anheuser Busch in the aftermath of their company’s takeover by the penny pinching Belgians and Brazilians at InBev.

Gary Katz, CEO of Deutsche Boerse unit International Securities Exchange, insisted during his appearance at the Reuters Exchanges and Trading Summit that all has been sweetness and light since the Germans assumed control of the upstart American options exchange and that there has been “nearly zero turnover” since the takeover.

But Thomas Kloet, Chief Executive of Canadian exchange powerhouse TMX, was one of several executives at the summit who insisted that cross border mergers can often be a recipe for disaster and that the ideal mergers are “domestic roll-ups” like CME Group’s takeover of Nymex and the Chicago Board of Trade or indeed TSX Group’s takeover of the Montreal Exchange, which created TMX.

Implicitly criticizing some of the first-ever cross border deals in the sector like NYSE’s merger with Euronext, Kloet said: “there are significant regulatory differences that make cross border mergers pretty difficult to do, especially when they start passing over salt water, so to speak.”

Being public ain’t all it’s cracked up to be

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IPOs can be very tempting for exchanges, allowing members big payouts and giving the exchanges more financial flexibility to take on new markets.

In the last few years, the majority of the biggest players in the space, from New York Stock Exchange operator NYSE Euronext, and Nasdaq OMX, to Chicago Merc operator CME Group and InterContinentalExchange have gone public.

Nasdaq president to finance companies: come hither

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A fertile planting ground for tech, biotech and even some energy offerings, Nasdaq OMX has historically struggled to lure listings in some other areas, notably financial services.

Now, that could be about to change, Nasdaq OMX President Magnus Bocker said at the Reuters Exchanges and Trading Summit. As Nasdaq looks for ways to attract new listings and end a virtual drought in IPOs, it sees financial services firms as one of the most promising areas.

CME has no European designs

The exchanges industry has seen countless trans-Atlantic mergers in the past few years, from the New York Stock Exchange combining with Euronext, and Nasdaq buying up Nordic exchange operator OMX, to Deutsche Boerse’e Eurex snagging the International Securities Exchange.

But you are not likely to see CME Group, parent of the Chicago Merc and the world’s largest derivatives exchange, flirt with any European counterparts anytime soon, CME CEO Craig Donohue hinted at the Reuters Exchanges & Trading Summit on Monday.

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