At first, I hereby declare that the history of London Stock Exchange (LSE) in this article with reference to Penton’s articles - ‘What’s driving exchanges’ urge to merge?’ accessed on 10 February 2011.
Penton describes how the exchange became the LSE which I have not yet born in the early 1980s. Starting from few institutions monopolize the market, it become filled with conflict of interest of LSE. The formation of this environment due to The Government adopted deregulation policy that competitive invasions of market segments in the early 1980s.
Nowadays, the information technology rapidly improve, no matter where the UK’s investors are, they still can invest their capital all over the world which not only LSE. Therefore, Stock Exchange became a liquid market which provides investors free trade in and out of their shares. Also, the shares transaction of investment institutions can be carried out under this planform. Stock market gives global investors a wide capital market to invest.
For instance, LSE or New York Share Exchange (NYSE) are two of world’s capital market which no longer to be the only Stock Exchange that providing financial services to investors because of globalization and technological change which investors might use internet services for trading.
Therefore, in order to remain the ability of competitive, every Stock Exchange market has to improve its efficiency of trading system and reduce the cost to survive. Simultaneously, corporate will expand their market to face the fierce market competition, so they will choose merge with other business.
On the 8th and 9th February, LSE and NYSE which are two of world’s leading market announced merge with stock market of Canadian and German separately.
LSE agree to merge with TMX group of Canadian will become the world's largest exchange for mining companies. Effective to LSE immediately, shares in the LSE climbed sharply to close up 3.1% shown in figure1.
Figure1: London Stock Exchange Group last updated at 11 FEB 2011, 16:30
The day after LSE announced merge with TMX group, NYSE Euronext and Deutsche Boerse said they were in talks about a merger. If it is successful, this deal would create the world’s biggest stock exchange firm. As the result, NYSE Euronext's shares jumped 14 per cent to close at $38.10 in New York.
The announcement of NYSE and German came on the day after LSE confirmed merge with Canada’s TMX, this caught the attention of investment analysts.
This announcement obviously is a competitive to overshadow merger of the LSE and TMX. If the deal goes ahead, those investors would be attracted by this great stage of investment platform. If it comes true, NYSE and German not only become the winner, also reduce a large amount of cost of publicity!
Change from monopoly market to free market for investors. It would generate of competition. Therefore, the more good news of business, the more attraction of ‘free’ investors.
Are we really a free investor? Or we just leaded by the news from stock market? And as investor, in this short term, how should the decision make in this two world’s leading market?
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