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November 2006: the situation around the world's stock exchanges is heating up
Material posted: Grinyaev SergeyPublication date: 22-11-2006

In recent weeks the situation has deteriorated in the relationship between global exchanges. The aggravation of the situation due, experts believe, to two factors: — high rate of acquisitions of foreign stock exchanges, American stock exchanges NYSE and NASDAQ; — the contradictions within the global financial elite caused the ambiguous perception of events by different groups.

In this regard, experts note that the high rate of removals, selected by the American exchanges NYSE and NASDAQ, says that the leadership of these exchanges the task is to gain control over the global stock market as soon as possible, even before the onset of some events that will determine the development of the world financial system in coming years.

Thus, in particular, the experts note that the pace of acquisitions of U.S. and European stocks from the major exchanges NYSE and NASDAQ in recent months has increased dramatically. The selected pace was so high that forced the NYSE to plan measures aimed at preventing the collapse of the business exchange in case of failure of the process of absorption of one of the trading platforms, because today a new round of takeovers begins even before the previous time to complete absorption.

In particular, in order to reduce the risks associated with the absorption of European exchange Euronext, the NYSE manual has been developed and implemented anti-crisis strategy. A key element of this strategy is that NYSE and Euronext to complete the merger will continue to operate as two independent companies. After the merger, the exchange and NYSE Euronext will operate based on a decentralized management system in which all operating subsidiaries, including exchanges themselves have autonomy regarding daily operational decisions. NYSE analysts expect that this approach will allow some to alleviate the problems arising during merging trading platforms. Future plans include the centralization and the close Association of trading platforms. In this case, according to the experts exchange company NYSE-Euronext will face significant challenges in combining of technological processes, organization, procedures and policies business planning. In addition, serious negative consequences would entail and the differences in the business cultures of these two companies, as well as saving on their posts of key personnel and NYSE Euronext. The protracted process of integration may interrupt existing relationships of each company with their former partners, which also adversely affect the activity of NYSE-Euronext.

Analysts also indicate that the absorption of the NYSE Archipelago exchange was only completed on 7 March 2006, According to experts of the NYSE, the exchange has not yet had time to adapt after that, moreover, the process of combining commercial activities of the NYSE and Archipelago will not be finalized by the time of the merger with Euronext.

In addition, on 1 November 2006 the NYSE acquired the remaining 30% stake in the company SIAC (developer and manufacturer of stock exchange software for the NYSE), having established full control of this company.

As a result, the NYSE manual, we have to combine the activity of NYSE, Archipelago, SIAC and Euronext simultaneously, and this, according to analysts, is connected with great difficulties, and according to some, the most pessimistic estimates quick and successful Association is simply impossible.

Experts point out that if management of the combined NYSE-Euronext will be unable to effectively manage the integration process, it may seriously affect its future position and will lead not only to an inability to achieve the anticipated benefits of the merger, but, in the case of adverse developments, may result in extremely adverse consequences for NYSE, until the buckling of the exchange in the stock market.

Thus, estimates of the NYSE indicate that the chosen strategy of acquisitions (primarily the pace of the merger, the business processes) can be detrimental to the exchange.

On the other hand the rapid absorption of key trading venues has led, according to some estimates, to tensions and possibly conflict in the international financial elite.

The conflict, perhaps because the takeover attempt of the London stock exchange by American stock exchange NASDAQ will lead to a complete loss of its status as London's global financial centre, which is de facto moved to new York. Such a development, as recent events show, are not satisfied with the world's leading players in the global financial market.

In recent developments in mergers and acquisitions global stock exchanges began to address the interest of political forces: if by the autumn the majority of transactions in mergers and acquisitions of exchanges remained in line with business relations, and did not touch political questions, after the performance of a number of European politicians against a potential merger of NYSE and Euronext, the situation has changed, and the game turned on an administrative resource of the U.S. administration.

Thus, in particular, on 16 November of the current year it became known that the Frankfurt stock exchange Deutsche Boerse withdrew its offer to merge with Euronext. Given that the option of unification of European stock exchanges has previously voiced most of the leading European politicians, such behavior of the leadership exchange, most analysts seemed at least strange. According to experts, now the control of Euronext with the big share of probability will receive the new York stock exchange NYSE.

However, analysts note that the statement of the representatives of the Frankfurt exchange was made immediately upon completion of the workshop the representatives of the Central banks of Europe and the USA, which was held in Frankfurt from November 10-11 this year. The seminar was attended by the head of the Federal Reserve system of the USA Ben Bernanke. Officially, it was stated that the seminar is devoted to the improvement of monetary policy in the new globalized world. However, according to analysts, the main discussion subject of the representatives of the global financial elite was the situation related to the rapid growth of crisis phenomena in the global dollar system. Perhaps the participants of the seminar representatives of the U.S. Federal reserve voiced some evidence that the fusion of European and American exchange required to maintain the stability of the global financial system. It was at the end of the seminar, the representatives of the Frankfurt exchange, previously persistently sought a merger with Euronext, refused the deal in favor of the NYSE.

However, in the same day, 16 November, the information appeared that on the international financial market is coming the spheres of influence. On this day seven of the largest investment banks in the world announced his intention to create its own exchange. As noted by the sources, the new project has the working title of "Diversified marketplace" and is focused on the latest achievements in the field of high technologies in the stock exchange. It will be founded by City Group, Credit Suisse Group, Deutsche Bank, Goldman Sachs, Morgan Stanley, Merrill Lynch and UBS. Banks-organizers of the new exchange are the largest players on the world's major stock exchanges. Total assets of this Association be over 9 trillion dollars. In Europe they commit about half of all securities transactions. Therefore, for a successful start of the project, experts say, they need a small portion of clients from London, Frankfurt and Paris. To attract them they are going high speed transactions on a new site and a much lower trade tariffs compared with current.

The announcement of the establishment of the new exchange has led to a significant drop in the prices of shares of European exchanges. Shares of Euronext, Deutsche Boerse and LSE have fallen in price almost on 10%.

However, the stated purpose of establishing new exchange (reduction of tariffs and the increase of speed of operation), most likely, are not dominant. The main motive of the domination of U.S. markets in the global financial system that does not suit the world's financial elite.

It is possible that the conflict in the financial elite has arisen concerning the withdrawal of the world financial system from crisis groundswell of payments deficit of the United States.

In favor of this assumption is the fact that just a few days after the statements of bankers about the creation of a new trading platform, it became known that the American stock exchange NASDAQ has offered us $ 5.1 billion. over 75% of the shares of the London stock exchange (LSE). However, the leadership of the London stock exchange immediately refused the proposal. Then, according to analysts, the NASDAQ began a hostile takeover of the London stock exchange. This is, in particular, is the fact that immediately after the refusal of London offers from NASDAQ, an American company Heyman Investment Associates bought an 8.8 percent stake in the LSE. In addition, the Scottish company Baillie Gifford on November 21, said about the sale of 1.5% stake in LSE in the interests of an unnamed investor. By some estimates all the shopping was done in the interests of NASDAQ.

About the possibility of a hostile takeover in case of refusal from the merger of experts has been discussed earlier, but this scenario was the least realistic. Recent events in the stock market has shown that in the conditions of tough competition the exchange are even ready to implement scenarios of a hostile takeover of competitors. This also confirms the assumption of the substantial shortage of time allocated to the American stock exchanges on control over the global financial market.

Analysts also note this fact: the rejection of Association with the European exchange Euronext has resulted in the reorientation of Deutsche Boerse on the search for acquisition targets in Central Europe and Asia. According to some sources among the possible targets for acquisitions and has a Russian exchange. In this situation, one possible and the most likely areas of occurrence of the Deutsche Boerse on the Russian market was its participation in the creation of the Russian oil or gas exchange. This is facilitated, in particular, a high level of presence of German capital in the Russian energy industry.

Conclusions

  1. The current stage of development of the world financial system is characterized by the growth of tensions among financial elites of the world.
  2. The growing tension associated with the ambiguous perception of the changes and the increase of the crisis a hundred various groups of influence in the global financial elite.
  3. The contradictions in the global financial elite can result in provoking a regional (and possibly global) financial crises in the coming years.
  4. The Russian stock market in the near future will be involved in the global processes of transformation of the global financial system.

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