Tuesday, February 06, 2007

Deutsche Boerse's next move

Amidst all the machinations we have witnessed in the last few weeks between the Nasdaq and the LSE, one has to ask what the Deutsche Boerse makes of all this.

The German stock exchange knows only too well what it is like to be turned down by the LSE on more than one occasion, having made various bids for the London exchange dating back to 2000.

Watching the protracted negotiations (if one can even call them that) between the LSE and the Nasdaq, one has to wonder what impact this is likely to have on Deutsche Boerse's strategy. The exchange has been unusually quiet in these last few weeks, going about its business. But is it regrouping its resources to launch another bid for the LSE or possibly another exchange, or is it a case of twice bitten ...?

In light of the competitive threat regulations such as MiFID poses for national exchanges and the impact the Code of Conduct on Clearing & Settlement is likely to have on exchanges' cosy arrangements with clearing houses and CSDs/ICSDs, some are suggesting that at some point, Deutsche Boerse may be forced to reassess its vertically integrated approach.

As the exchange and securities clearing and settlement landscape in Europe evolves in response to regulatory and market forces, some interested observers are asking what is Deutsche Boerse likely to do with its post-trade business, which includes the ICSD Clearstream? Will it form separate subsidiaries and then sell them off bit by bit? What is the exchange's next move likely to be?

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