NYSE Euronext, the biggest operator of U.S. equity exchanges, must expand into Asia after agreeing to be purchased by Frankfurt-based Deutsche Boerse AG, said Richard Grasso, the former chairman and chief executive officer of the New York Stock Exchange.
Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. approved a direct offer to shareholders to buy NYSE Euronext this week, formalizing their hostile bid. NYSE Euronext’s board has stuck with its takeover agreement from Feb. 15 with Deutsche Boerse that would create a company with equity and futures markets in the U.S. and Europe.
“The appropriate question is ‘How do you as an exchange operator globalize your franchise across geographies, across products?’” said Grasso in an interview today on Bloomberg Television’s “In the Loop” with Betty Liu. “I don’t think it’s a matter of asking the question ‘How can New York be taken over by a non-U.S. player?’”
Grasso said the “piece missing from the equation” in both offers that’s key for the U.S. to remain competitive is a potential merger with an exchange in Asia, such as one in Hong Kong or Tokyo. The world’s largest market owner by stock value is Hong Kong Exchanges & Clearing Ltd. at $24.2 billion, compared with $16 billion for Deutsche Boerse and $10.5 billion for NYSE Euronext.
“To truly be a global market, you need all three of those arenas sitting under the same franchise,” he said. “A lot of competitive capital markets have said ‘Stay away from the U.S.’ That’s wrong.”