Mergers sweeping financial exchanges are in part an unintended consequence of global financial regulatory reforms, the head of IntercontinentalExchange Inc. said Wednesday.
“It’s an unintended consequence, and not necessarily a positive consequence,” Jeffrey Sprecher, chief executive of ICE, told a Futures Industry Association conference here.
In a flurry last month, Deutsche Boerse AG bid for NYSE Euronext, London Stock Exchange offered to buy Toronto Stock Exchange parent TMX Group Inc. , and U.S.-based BATS Global Markets bid for fellow private venue operator Chi-X Europe.
Late last year, Singapore Exchange bid for Australia’s ASX Ltd, reviving an industry consolidation wave that had subsided for a few years.
Lawmakers and regulators globally are revamping financial markets, including forcing much of the vast over-the-counter derivatives market through exchanges and similar venues, as well as clearinghouses.
“Exchanges are making the logical moves to get scale and run the business,” Sprecher later told Reuters on the sidelines of the conference.
ICE, a futures-oriented exchange and clearinghouse operator, could team with Nasdaq OMX Group to make a counter-bid for NYSE Euronext, sources familiar with the situation said this week.
Bourses have responded to competition in their traditional stock-trading businesses by diversifying into more profitable derivatives businesses, in turn putting pressure on futures-oriented exchanges.
Andreas Preuss, CEO of Deutsche Boerse’s Eurex derivatives market, told the conference that exchanges have a “constant need to get more load onto existing infrastructures.”
“I think none of us up here would claim that they feel they have reached the right load factor,” he said on a conference panel with Sprecher and executives from CME Group, NYSE Euronext and Singapore Exchange.
The head of derivatives giant CME Group Inc, which is not formally involved in the current merger frenzy, said it’s important that the Commodity Futures Trading Commission and other regulators do not overstep their mandate from U.S. lawmakers.
A “fundamental concern is making sure that, in the rule-making process, the CFTC and the other agencies are really sticking to what Congress intended and what is required by the (Dodd-Frank) Act,” said CME Chief Executive Craig Donohue, “and not use it as an opportunity to in effect legislate and get into a lot of areas that are well beyond the intention of the Congress.”
