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Rival Bids for NYSE Undergo Regulatory Scrutiny

21 April 2011 - News - Editor

As the battle between Nasdaq and the Deutsche Börse continues, with the New York Stock Exchange as the prize, regulatory authorities are examining all options on the table to ensure that no antitrust laws are violated. The US Department of Justice is looking at how competition in equity listings may be affected in the event of a takeover by Nasdaq, as well a the impact on US companies trying to raise capital in the country in the event of foreign ownership proposed by the Deutsche Börse deal.

Nasdaq OMX, along with its partner the Intercontinental Exchange (ICE) are pulling out all the stops to persuade NYSE, by upping their offer package to around 19 percent above that of the Deutsche Börse. In response to concerns regarding the possible elimination of competition by NYSE joining forces with Nasdaq, it has been pointed out that the listing business, and its fee structure, is regulated by the SEC, with the current rivals attracting different economic sectors with their services, and seldom competing for the same business. Most notably, tech companies tend to favor Nasdaq, as is evident when examining the Nasdaq-100 – a stock market index of the top 100 non-financial companies. On the list are companies such as Adobe Systems, Apple Inc, Automatic Data Processing, Cisco Systems, Dell Inc, Google Inc, Infosys Technologies, Intel Corporation, Microsoft Corporation and Yahoo! Inc.

Nasdaq estimates that the merger with NYSE could result in savings of US$610 million annually, primarily through pooling resources and eliminating duplicated technology and equipment, as well as through staff cuts. NYSE's current derivatives business would be channeled to ICE. Nasdaq also directs attention to the need for the United States to preserve its competitive position in the trend toward globalization. NYSE counters this assertion by presenting the deal with the Deutsche Börse as a strategic alliance, and not as a takeover.

Many analysts agree that regulatory obstacles can be overcome, but what really matters is the opinion of NYSE Euronext shareholders as to which deal they consider to be most worthwhile. In the meantime it is business as usual on Wall Street where stock market indicators responded positively to strong tech results on Wednesday, boosting the Dow by 187 points to close at 12,454, the S&P 500 gained 18 points to 1,330, with the Nasdaq Composite rising 58 points to 2,803, being 1.5 percent, 1.4 percent and 2.1 percent increases respectively.

 


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