MERGER MANIA GRIPS TOP EXCHANGES

The merger mania among global stock exchanges has heated up as Nasdaq launched another unsolicited bid for the London Stock Exchange (LSE) last month and the New York Stock Exchange (NYSE) and pan-European Euronext expect to clinch their deal by the end of March.

Motivated by a desire to reduce

costs and boost client numbers in an increasingly competitive marketplace, executives at equity exchanges around the globe are expected to keep consolidating their trading capacities and building alliances. "There's too much capacity," says David Cox, chief research officer at Financial Insights, an independent research and advisory firm based in Framingham, Massachusetts. "Another reason is alternative trading systems. These mechanisms are less expensive for brokers."

The mergers are not just among small, regional exchanges, either. The 214-year-old NYSE and six-year-old Amsterdam-based Euronext, which itself was formed through the merger of bourses in Paris, Amsterdam, Brussels and Lisbon, should begin operating as a single entity by the end of March, says Richard Adamonis, a NYSE spokesperson. Stockholders for both the NYSE and Euronext were to vote on the proposed business deal last month in New York and Amsterdam respectively. NYSE edged out its German rival, Deutsche B?rse, in a $10 billion cash and share offer made last spring.

The chairman of Euronext isn't wasting time and has already invited the Tokyo Stock Exchange (TSE) to create a three-way link with the NYSE. At a conference in Tokyo Jean-Fran?oise Th?odore said his first goal was to bring other European exchanges under one roof. But the TSE would be the logical partner as he tries to offer investors seamless trading across three continents. The new transAtlantic bourse is to be led by NYSE's CEO John Thain, while Th?odore heads international operations and serves as deputy chief executive officer.

Cox doesn't find Th?odore s outreach to Tokyo surprising. "Asia will be the next wave of consolidations," he says. In the meantime, Financial Insights expects the Tokyo exchange to invest heavily in its infrastructure to prevent a recurrence of the technology meltdowns that occurred over the past year. "Then the big question is, What will Deutsche B?rse do?" he says.

-Paula L. Green