I spend a lot of time with the technology arms of both these exchanges, so I figured while everyone else debates what a potential name might look like, I’d opine on what a marriage might look like from a technology offering perspective. In short, while there is some overlap, there are some highly complementary offerings. While trading volumes and listings may be down, the real money potential from a growth perspective would come out of the market data and technology areas. NASDAQ OMX keeps those groups separate right now. NYSE Euronext has them combined.
On the exchange technology side, NASDAQ OMX has the lead. Over 70 exchanges run on NASDAQ OMX technology and HFT shops I’ve spoken with like the matching engine. That said, NYSE Euronext is no slouch and maintains a small cadre of exchanges running their technology as well. A marriage would provide ownership of a significant portion of global trading done on a single provider’s technology.
Risk management maintains the biggest overlap now that NASDAQ OMX owns FTEN and NYSE Euronext offers RMG. This is also becoming a popular area for market entrants right now. Celoxica, Fixnetix, Mantara, ULLINK, SunGard, BonTrade, etc. are all vying for pre-trade market share. I’m not sure how RMG and FTEN would come together. That said, NASDAQ OMX also owns SMARTS, which controls half of the commercial market for trade surveillance at exchanges and regulators and has its sights set on the broker/dealer community. That market is owned by Actimize, with SunGard and Oracle (Mantas) following. Combining strong pre-trade capabilities with market surveillance provides a compelling differentiator and could be interesting.
For market data products, NYSE Euronext and NASDAQ OMX are quite complementary. NASDAQ OMX has made some forays into providing retail access to both real-time and historical market data, while NYSE Euronext has been focused on creating more commercial institutional products like their consolidated tape offering and their Wombat ticker plant / feed handlers. Combining the market data teams is perhaps the most exciting potential product area. Fritz and I looked at the exchange data market potential last year and found it a hot revenue area.
Lastly, NYSE Euronext is much further along building commercial product for broker/dealers. They have the processes in place, the management structure and coordination, and the experience. They could help NASDAQ OMX, which has just begun moving into that area. They have new datacenters with excess capacity, consulting capabilities through a partnership with CSTK, and the SFTI network. Their marriage could upgrade global trading capabilities given their presence and position in the exchange technology market. That said, it could also bring with it a slew of M&A as the combined exchange goes after more of the broker/dealer trading stack.