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German bid to take over the New York Stock Exchange

Germany's Deutsche Boerse AG, the company that runs the stock exchange in Europe's largest economy, could soon take over the New York Stock Exchange.
/ Source: The Associated Press

Germany's Deutsche Boerse AG, the company that runs the stock exchange in Europe's largest economy, could soon take over the New York Stock Exchange.

NYSE Euronext Inc., which also operates exchanges in Europe, said Wednesday it is in "advanced discussions" about a possible merger with Deutsche Boerse, owner of the Frankfurt stock exchange.

The new company would have dual headquarters in New York and Frankfurt. The announcement came hours after news of a $2.9 billion merger between the London Stock Exchange and TMX Group Inc., parent company of the Toronto Stock Exchange.

Deutsche Boerse shareholders would hold 59 to 60 percent of the combined company. NYSE Euronext said it expected the two market operators to combine their businesses under a new legal entity incorporated in the Netherlands.

The New York Stock Exchange is already the world's largest stock market. But its parent, the $9.9 billion NYSE Euronext, isn't even the largest exchange company in the U.S. That title belongs to the $20 billion CME Group Inc. CME runs the Chicago Mercantile Exchange, where wheat, corn and pork belly futures are traded, as well as a number of other exchanges.

"The real motivation here is really about competing with the CME Group," said Larry Tabb, founder and CEO of the Tabb Group. Increased competition has made stock trading less profitable. So the answer is to get bigger, he said.

But the thought of a German company taking over the NYSE could run into trouble with Congress, Tabb said. "It's going to get interesting," he said.

The NYSE Group, operator of the New York Stock Exchange, bought Euronext for $10.2 billion in 2007. The combined company handles stock and derivative markets in Amsterdam, Brussels, Lisbon and Paris as well as the NYSE Liffe derivatives market.

Deutsche Boerse, whose predecessor was founded in 1585, operates the stock market in Europe's largest economy. It also runs Europe's largest derivative exchange, the Eurex.

Aite Group analyst Simmy Grewal said more mergers may be on the way. Shares in other exchanges jumped on the news. The Nasdaq OMX Group Inc., the IntercontinentalExchange and CBOE Holdings Inc. all gained more than 4 percent. CME Group rose 1 percent.

Deutsche Boerse AG chief executive Reto Francioni would become the new group's chairman, and NYSE's CEO Duncan Niederauer, based in New York, its CEO.

The new company's executive committee would be drawn equally from the current leadership of both companies.

For Deutsche Boerse, the deal would represent a breakthrough in its aim to strengthen its international profile. Deutsche Boerse had been in merger talks with NYSE Euronext three years ago, but no deal was reached.

In 2006, the company tried to buy Euronext NV in a bid to build a pan-European stock exchange, but it eventually gave up, clearing the way for NYSE to merge with Euronext, which then formed the world's first trans-Atlantic stock exchange.

In 2005, a Deutsche Boerse takeover bid for Britain's London Stock Exchange Group PLC did not succeed.