IntercontinentalExchange's $8.2 billion cash-and-stock deal for NYSE Euronext should mean most institutional traders will see no change in trading costs, according to financial industry analysts.
“When you look at U.S. institutions … still the bulk of their trading … is in cash products. This deal doesn't have much to do with cash products, it's much more of a derivative play,” said Adam Sussman, partner and director of research at financial industry consulting firm TABB Group.
“If I were an institution I wouldn't be concerned that this deal would increase the cost of trading cash products,” Mr. Sussman said in a telephone interview.
Mr. Sussman said the mix of the two businesses is complementary without a lot of overlap.
“I don't see it giving the combined company some type of pricing power that would lead to an increase in the cost of trading,” Mr. Sussman said.
Sean Owens, director of fixed income and OTC derivatives at Woodbine Associates, a capital markets consulting firm, said his firm believes the deal is “really complementary. The two firms have very little product overlap. They're both leaders in their core markets.”
“The one area we had some thoughts on were the credit markets. ICE's capabilities in that market with NYSE's cash business, it fills existing gaps in two existing product offerings,” Mr. Owens said in a telephone interview.
The merger of a commodity exchange and stock exchange is a logical step in market evolution that has seen the takeover by Hong Kong Exchanges and Clearing of the London Metal Exchange earlier this year and the merger of Russian exchanges MICEX and RTS in 2011, according to Howard Tai, a senior analyst at financial industry consulting firm Aite Group.
“The next stage in market evolution means that any investment instrument will more likely be traded at a centralized location, mostly electronic, mostly transparent. From an end-investor standpoint, it brings longer-term benefits,” said Mr. Tai in a telephone interview. “It will probably reduce cost. It will bring them access to multiple asset classes and the financial instruments that comprise each of these asset classes at a centralized location with plenty of transparency.”
Last year, the U.S. Justice Department blocked a joint hostile bid by ICE and Nasdaq OMX Group for NYSE Euronext based on the concern that the combination would dominate U.S. stock listings.