Trading blocs: What next for the stock exchanges?

Competitive pressures and regulatory changes have spurred merger activity among the Western stock exchange groups in recent months, but growth in the emerging economies means future M&A activity is more likely to involve emerging markets players.

This report explores the perspectives on the recent trends affecting M&A activity within the global stock exchange sector.

Key messages

  • Consolidation among the Western exchanges will move towards an end game, with the key hurdles to further M&A being political and regulatory opposition.
  • Some specialist European and US exchanges have chosen to remain out of the M&A race.
  • Sustainable trading margins and concentration on local capital markets have allowed these Western exchanges to focus on organic growth strategies.
  • Recent European and US regulatory changes have on the one hand increased competition, while on the other, opened up new growth opportunities within the derivatives markets.
  • Maintaining competitive IT platforms is paramount if exchanges are to continue attracting customers in what has increasingly become a buyers' market. Those that are constrained from engaging in M&A are likely to enter into technology sharing initiatives.

As the emerging market exchange groups build up scale through trading volume growth and greater levels of network integration, M&A activity in these territories is likely to accelerate over the next five years.