Threes A Crowd

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What's going on?

Spains BME, home of the Madrid stock exchange, has been the center of attention this week: Germanys Deutsche Brse and the Netherlands Euronext are both reportedly considering proposing mergers, while Switzerlands SIX Group made its bid official.

What does this mean?

Stock exchanges make money whenever anyone makes a transaction on them, so it follows that those with the most activity tend to earn the most. But trading has become increasingly computer-driven, which in turn reduces the amount of trading investors actually do. In an effort to grow bigger, then, exchanges are having to team up and eliminate duplicate costs, as well as bolt on pricey extra data services. Thats why London Stock Exchange bid on Refinitiv this summer (tweet this).


For now, only SIX has made an official bid for BME. But Euronext has high hopes since it shares a similar regulatory framework as BME as part of the European Union and Deutsche Brse may yet jump into the fray with the same thinking.

Why should I care?

For you personally: More investors mean a party.


Investors hoping to profit from BMEs stock will have to judge whether higher counter-offers will be forthcoming, as well as whether the mergers likely to win regulatory approval. If theyre skeptical, they may prefer to bet BMEs price will fall than to buy its stock. But investors on both sides have challenges: professional merger and acquisitions investors know regulators whims and companies workings inside out and some have algorithmic trading programs which react instantly to new developments.



For markets: Stock exchange trade thyself.


BMEs stock rose 40% after SIX announced its bid earlier this week, and there was good news for publicly listed suitors Euronext and Deutsche Brses stocks too. Usually, a buyers share price falls because the company uses up resources and takes on the risk that the deal wont work out. But both stocks have risen this week, suggesting investors think this mergers worth the risk.

Originally posted as part of the Finimize daily email.

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