Thursday, September 20, 2007

ME exchanges battle for dominance

The long suffering Nasdaq which was unsuccessful in its bid to court the London Stock Exchange (LSE) and looked like suffering a similar setback in its pursuit of OMX Group in the Nordic countries, appears to have reached an interesting comprise.

Bourse Dubai, the other suitor for OMX, has agreed to let Nasdaq have OMX, while the Dubai exchange has agreed to take on Nasdaq's stake in the LSE, as well as a 20% stake in Nasdaq itself. It is all starting to sound rather incestuous in the world of exchanges - everybody is hopping into bed with one another in their bid to go global.

As part of the deal Bourse Dubai has agreed to give Nasdaq a share in the fledgling Dubai International Financial Exchange, which will now carry the Nasdaq name and use both Nasdaq and OMX market technology. Is it a 'win-win' for all parties? Well the LSE and Middle Eastern sceptics in Washington may not be cracking open the champagne bottles just yet.

As some pundits suggest, a government-owned UAE exchange owning a stake in a US brand name like Nasdaq may rise the ire of those that are not in favour of any Middle Eastern company owning anything American. One only has to recall Dubai Ports World's decision to sell off its US operations to an American owner following pressure from Congress. Is the US Congress likely to have similar feelings of discomfort about Bourse Dubai owning a stake in Nasdaq?

Similarly those that nurse nationalistic sentiments about the LSE may be equally miffed by the deal. This was borne out by the LSE's response to Qatar making an offer for Nasdaq's 31% stake in the LSE. According to a report in The Times, the LSE welcomed the Qatari investment as a "long-term" play. No such sentiments were ascribed to Dubai's stake in the LSE.

Now it appears the battle lines have been drawn between Dubai and Qatar with the latter making an overnight raid to acquire an almost 10% stake in OMX. Few could have predicted that the fate of the LSE and Nasdaq would lie in the hands of Middle Eastern exchanges.

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