Giving Wall St. A Run For Its Money

The London Stock Exchange and the Deutsche Boerse said they'll merge on Wednesday, creating Europe's largest exchange, and announced plans to build a pan-European high-growth market with Nasdaq.

The U.K. and German exchanges will create a new company, iX, which will be equally owned by both exchanges and shareholders. The new exchange will command 53 percent of traded stock market volume as well as the biggest derivatives market worldwide through Eurex.

London's Techmark and Germany's Neuer Markt will provide the basis for the new pan-European high-growth market -- Nasdaq iX -- which will be Europe's biggest, commanding 80 percent of trade volume. The iX and Nasdaq will be equal shareholders and the venture will be managed from London and operated from Frankfurt.

All companies on the merged exchange will eventually be traded in euros, although initially, companies from the respective bourses will continue to be traded in sterling and the euro. The bourses also said they are hoping to include other European markets and have already begun discussions with Milan and Madrid.

"This merger will create benefits for investors, issuers and intermediaries regardless of their size: all market participants will benefit from lower spreads due to higher liquidity," said Werner Seifert, chief executive of Deutsche Boerse and the CEO designate for iX.

"iX will provide a level playing field for all market participants," said Seifert.

It was just under a year ago that Nasdaq announced its own plans to launch a pan-European exchange in a bid to create seamless 24-hour trading. The goal remains the same under the joint venture, with plans to eventually hookup Nasdaq in the U.S. with Nasdaq Europe and Nasdaq Japan. See related story

Under the joint venture, Techmark and the Neuer Markt will eventually cease to exist as separate markets and will be folded into Nasdaq iX. The new venture will adapt the Xetra system as its trading and network platform.

Securities from Germany's Neuer Markt and the Techmark, plus the Nasdaq 100 companies will be traded, with the goal of offering European investors an Internet-accessible, low-cost trading platform.

Frank Zarb, CEO of Nasdaq. said the global trading platform is only months away. "Today's announcement represents one further step in realizing our global vision," he said. "The Nasdaq iX joint venture combines the best of the existing high growth markets in Europe with future new listings for new economy stocks."

iX will be chaired by Don Cruickshank, chairman designate of the London Stock Exchange and Warner Seifert will become the chief executive. The iX venture will envelope the businesses of both exchanges, except for Deutsche Boerse's 50 percent stake in Clearstream.

Markets will now be waiting to see how the rest of Europe will fall in line with the plans, especially Euronext, the merger announced in March of the Paris, Brussels and Amsterdam markets.

Paris and Madrid have also announced in recent months their own high-growth technology indexes, similar to London's Techmark.

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