June 3, 2006
The Wall Street Journal today wondered, in a story by Ian McDonald, Aaraon Lucchetti, & Alostair Mac Donald, "Will the NYSE's Colossal Merger Help Investors?" It's the right question. The NYSE Groups is attempting to merger with Euronext NV, itself the product of a merger of markets in Amsterdam, Paris, Lisbon and Brussels. This simple answer is "they do not intend too buy may anyway by mistake." NYSE is attempting to create a one stop trading market and will get there by merging with rivals and price cutting those rival it cannot merge with. Eventually the NYSE hopes to become dominant and its prices will rise. At issue is whether the barriers to market entry, once the NYSE becomes the dominant market, will be high or low. If high, the NYSE is sitting pretty; if low, the NYSE will find itself with new competitors. The key to the barriers to entry will be the regulations of the SEC, which in the past and until recently, have favored the NYSE. The NYSE has been a very effective political, lobbying organization with the SEC and Congress, protecting its position. That is Grasso's claim to fame.
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