London and German stock exchanges in merger talks
bbc.co.uk/news/business-35639157
bbc.co.ukPosted Feb 23, 2016, 3:05 PM UTC
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bbc.co.ukInteresting timing
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So lets say this happens. What are the implications?
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As far as I can tell it would mean increased economic/financial cooperation, allowing Europe to compete more efficiently on the world stage. Although I am no expert on the subject.
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From what I can piece together, it also makes the LSE somewhat Brexit-proof.
The one dangerous short-term Brexit consequence for the LSE is that the Eurozone countries will legislate to restrict trading of certain Euro-denominated assets to Eurozone marketplaces. They have tried to do this before, but the UK blocked it, as it could while being a member of the EU.
Now, if trading of these assets is "repatriated" then it will go to Paris or Frankfurt. It seems likely that most will go to Frankfurt.
So with this merger, the combined company loses only the fraction that goes to Paris in the worst case scenario. Thus, this deal makes being an owner of LSE shares at the time of a possible Brexit a lot less scary.
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there are no such thing as "LSE shares", an exchange is simply a location where participants get together to trade shares.
you can buy and sell shares that have their primary listing on the LSE on most other exchanges throughout the world, and vice-versa.
Eurozone countries will legislate to restrict trading of certain Euro-denominated assets to Eurozone marketplaces
short of outlawing foreign ownership of shares, this is impossible to enforce.
people will set up Special Purpose Vehicles (a company with a single purpose) domiciled in a non-EZ countries that will buy a specific Euro-denominated share, then list shares in the SPVs themselves on non-EZ exchanges in the non-Euro currency. (this is basically a hostile depositary receipt)
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I meant shares (or however the ownership is organized) in the company "London Stock Exchange" itself. The people that care about this are the owners of the LSE, because the value of the LSE would drop if a Brexit happened. After the merger, the value would drop less, since much of the supposedly "lost" business would simply move to another part of the company.
Regarding the trading of Euro-denominated assets, I'm no expert. But the last time, they went after the clearing houses (ECB, not legislators, my bad) and London was pretty quick to counteract: http://www.ft.com/intl/cms/s/0/146a256e-dee1-11e0-9130-00144feabdc0.html
I'm not sure if they can impede or at least hamper the Special Purpose Vehicles, but my guess is that if they can, they will try.
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When London and Milan merged nothing happened.
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What would this do to the FTSE?
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Very unlikely that the European Commission will allow the merger of Europe's two biggest stock exchanges. For the same reason they already prohibited the Deutsche Börse/NYSE Euronext merger some years ago.
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Good job Boris!
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Would be an interesting step at the current time. It has potential benefits for both in case of a Brexit and sounds reasonable in case the UK stays.
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This is actually quite a good thing. Props!
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Now 12-15% of the UK's total tax income will be will be linked to the EU!
Good luck leaving now and not feeling the hurt. Pretty ballsy move by the city, basically playing their hand saying "we are staying in Europe, it would be good if you do to
Edit; As the comments below have pointed out, I was mistaken in this belief, it appears it will not bring a closer EU integration in any meaningful way.
Cheers for the corrected info guys.
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Now 12-15% of the UK's total tax income will be will be linked to the EU!
The London Stock Exchange is already merged with the Italian Stock Exchange. This changes very little.
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Euronext is owned by the American company that owns the New York Stock Exchange - does the USA need to be in the EU too?
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Two relatively small companies have merged. I think you are reading too much into this.
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Nothing is official yet though. They are still in early stages of the talks, and they've been at this stage twice before but the deal fell through.
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This isn't an EU thing, its just a between Germany and the UK thing. London's Stock Exchange is already merged with the Italian Stock Exchange, its independent of the EU from what I understand.
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IIRC these are just the companies that run the stock exchanges, not that the respective financial markets will merge
Seconded. Like the announcement the other day that a Chinese company is buying the Chicago Stock Exchange.
The Chicago Stock Exchange is extremely small but this announcement did raise eyebrows. It will be interesting to see how it progresses given the fact financial exchanges seem quasi-protected in many countries.
Thay said, Chicago is much more of a commodities city, with CME Group (formerly the Chicago Board of Trade and the Chicago Mercantile Exchange) making up the bulk of the trading. Options are also big, which are traded on the Chicago Board Options Exchange. Frankly I'm surprised the Chicago Stock Exchange is still around.
Did you also grow up with daily TV updates on the futures of corn and pork belly? These blurbs were my first intro to trading.
Even in Chicago most consumer TV is directed towards equities. So the main stock indices in New York were the main numbers cited on TV. But the CME dwarfs the NYSE or Nasdaq as far as dollar volume.
Are you a trader? I have a finance undergrad and a law degree. I would like to get into financial compliance especially at a major exchange or clearinghouse. I have not been licensed to practice law for a year yet, so am trying to get some related experience. But ultimately that is where I'd like to end up (or finance related litigation).
OMG, Trump was right, the Chinese... They're gonna take over the world !