Who Owns the Stock Exchanges aren’t like other businesses. The performance of the national stock exchanges is often taken as a proxy for the fitness of a nation’s economy, or at least investor enthusiasm for the country’s prospects. Federal businesses also play an under-appreciated policy role in deciding the listing and compliance standards for firms that desire to go public. On top of all that, there is a nebulous but real sense that national pride is often somehow linked with stock exchanges.
With that in mind, consolidation moves in the stock exchange sector attract a great deal of attention, for better or worse. The European Union blocked a proposed merger of the Deutsche Borse with NYSE-Euro next (NYSE: NYX) in 2011. The brand new company might have a digital monopoly within the sale of derivatives in Europe. The same year, a bid for the London Stock Exchange (or its partner London Stock Exchange Group) to get TMX Group (owner of the Toronto Stock Exchange) fell through when Toronto shareholders rejected it.
The ownership of the remainder of the world’s major exchanges is a mixed bag that ranges from publicly traded companies to government ownership.
NYSE Euro next is a publicly traded company listed in the S&P 100 Index and claims to sell $100 billion in securities each trading day.1
Its name says all of it: It owns the NYSE and the European exchanges in Paris, Amsterdam, Brussels, and Lisbon.
It is far and away from the biggest exchange in terms of both exchange market capitalization and exchange-traded value. Once owned entirely by its members on the ground, the NYSE went public in 2006 after acquiring Archipelago and then Euro next in 2007.
Tokyo Stock Exchange
The third-largest stock exchange on the planet can also be the biggest that’s not publicly traded. Although Tokyo Stock Exchange is organized as a joint-stock corporation, the shares are closely held by member firms such as banks and brokerages.
In comparison, the smaller Osaka Stock Exchange is publicly traded, which perhaps befits long-held Japanese stereotypes about Osaka being more entrepreneurial and less hidebound than Tokyo.
London Stock Exchange
The world’s fourth-largest exchange is owned by the London Stock Exchange Group, which will be itself a publicly traded company.
A business history traces its origins to a joint called Jonathan’s Coffee House, where prices of eight bits were posted in 1698. The business enterprise became popular before the introduction of the telegraph in around 1840.2
Hong Kong Stock Exchange
Asia’s third-largest exchange is a subsidiary of Hong Kong Exchanges and Clearing Ltd. This publicly traded company owns the Hong Kong Futures Exchange and the Hong Kong Securities Clearing Company.
Bombay Stock Exchange and National Stock Exchange of India
Along with the Tokyo Stock Exchange, India’s major exchanges are throwbacks to how most exchanges organize themselves. As the National Stock Exchange of India is demutualized, it is still primarily owned by banks and insurance companies. The Bombay Stock Exchange is approximately 40% held by brokers, with other outside investors and domestic financial institutions owning the rest.
Other Major Exchanges
The trading and investment world is not just about stocks. Derivatives are very lucrative to exchanges. In the United States, the Chicago Mercantile Exchange (CME) was demutualized in 2000, went public, and eventually acquired the Chicago Board of Trade and NYMEX. CME Group has become a significant player in the futures and derivatives world. On the options side, the Chicago Board Options Exchange (CBOE) also trades publicly as CBOE Holdings.
Eurex is a significant derivatives exchange owned by Deutsche Borse and SIX Swiss Exchange, as its members privately own the London Metal Exchange through LME Holdings Ltd.
Last and not least, the Tokyo Commodity Exchange is structured like the TSE and is owned principally by the banks, brokerage, and commodity trading firms that transact their business through it.
The Bottom Line
The owners of exchanges can require companies to pay listing fees, traders to pay for market access, and investors to pay transaction fees. It is not altogether surprising, then, that there’s been so much consolidation activity in this space.
While these transactions are interesting, they’ve little benefit for the average person investor. Trading stocks listed on foreign exchanges remains difficult and expensive for U.S. investors, and no merger will change that.
Meanwhile, it appears like there is an unmistakable trend available in the market of the stock market towards greater global integration and fewer small independent operators.