The globalization of stock exchanges, highlighted by the NYSE-Euronext deal, could open a new front in the battle among equity index providers to attract users — and dollars — by raising the possibility of around-the-clock trading.
From a trading perspective, global stock exchanges will help index providers get their product out to more investors more efficiently, industry executives said.
"The immediacy (of trading) increases the range of options, and that is really the fundamental benefit over time," said Rabbe Ekholm, a managing director at MSCI Barra, New York. "I think the impact is significant and positive of fundamentally increasing the immediacy of various index-based ways of executing an investment intent."
At a news conference on June 6 unveiling plans for a new set of global equity indexes, Kelly Haughton, strategic director of Russell Indexes, Tacoma, Wash., said he expected global stock exchanges would lead to increased trading 24 hours a day in many products, including highly liquid stocks and global indexes.
"People are going to want to have these indexes because there's going to be trading going on,' he said, referring to the new Russell global indexes.
But Milton Ezrati, chief economist and market strategist at Lord, Abbett & Co. LLC, Jersey City, N.J., said 24-hour trading of global stock indexes is probably a long way from happening, mostly because of currency.
"The issue that comes to mind with global indexes traded globally is currency," he said. "What currency will it be traded in?
"Exchanges can live in hyperspace and businesses can live in hyperspace but investors live in a place where liabilities are denominated in one currency," he said. "That's not going to stop the globalization process, but in this brave new world we neglect the fact that the ultimate investor, whether a person or an institution, does have liabilities denominated in one currency."