It’s all happening in the exchange industry. Within a matter of hours, announcements of two potential mega-mergers among large stock market operators got the, er, stock markets buzzing.

First, the London and Toronto bourses announced their intention to merge, creating an exchange with “greater scale, scope, reach and efficiencies.” Later, transatlantic giant NYSE Euronext announced that it was in advanced discussions with German operator Deutsche Börse. The deal, if consummated, would create a “true pacesetter across the spectrum of capital markets services,” boasted the press release.

The rationale behind the proposed tie-ups—including the ongoing discussions between the Australian and Singaporean exchanges—is a mixture of offense and defence. The deals bring both diversity and strength in key niches, such as natural resource companies for the London-Toronto group. The fear of upstart competitors is also a motivation, as former incumbents have steadily lost market share in rapidly commoditised, volume-dependent business lines like share trading. The scope for cost-cutting at merged exchanges is large—a purported €300m a year for the NYSE-Deutsche Börse combination. If strength/safety in numbers is the way forward, many are now asking: who’s next?

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