World stock exchange merger and the new order of global equity market

In the past five years, there are several stock exchange mergers involving major stock markets in the world. Recently, Frankfurt's Deutsche Borse and New York Stock Exchange are in advanced talk on possible merger.
Citigroup analyst Donald Fandetti stated that the combined entity would be the largest global exchange since more than 90% of futures and derivatives in Europe are traded in those exchanges. They may also serve as a platform for international ventures.
Also, London Stock Exchange and Toronto Stock Exchange also announced that they will merge.
Such trans-atlantic stock exchange merger actions facilitate more investors to trade more types of stocks within their trading hours.
They can also trade stocks of more foreign companies in their home countries in order to avoid taxations and procedures of international stock tradings.
Why there are lots of such mergers take place?
As the advancement of computer trading and popularity of the Internet, more and more investors tend to trade their equities across borders
and the volume of trade processing has increased by tenfold, or even hundredfold.
In the trend of capital globalization, co-operation and merger among financial institutions are inevitable. These actions help better utilization of capital, resources and improve the efficiency of trading. A lot of stock markets plan to co-operate, share market information with each other, or even accept more foreign companies to trade their equities in order to promote their competitiveness.
Many financiers believe that international stock exchange mergers can improve the competitiveness of financial sectors of the host countries and facilitate to prompt reactions by the market due to longer trading hours.
According to William Blair’s Lane and Leikhim, mergers of exchanges help to eliminate major administration expenses,
and there should also be important strategic benefits through clearing synergies. This possible merger can combine two major interest futures exchanges in Europe.
For Hong Kong Stock Exchange, there are still no clear plan to merge or acquisite other stock exchanges. However, its existing aim of focusing on China market already failed to comply the existing trend of financial globalization because the two trans-atlantic mergers have posed a threat to Hong Kong Stock Exchange since this will reduce the incentive of foreign natural resource companies to list on Hong Kong Exchange.
Moreover, a lot of large enterprises in Asia Pacific region have already listed on New York Stock Exchange. When those companies list on Hong kong Exchange, that can attract more international capital to invest in Hong Kong SAR and greatly increase the trade volume.
Hong Kong Stock Exchange should seek more co-operations to exchanges in greater China and south-east Asia so that the exchange can become the regional financial hub.
Moreover, Hong Kong has the advantage on time zone. If Hong Kong Exchange introduce electronic trading, the trading time can be extended to at least 8 hours. This can extend the trading period of the proposed merged market to at least 100 hours per week. Investors in Asia Pacific region can trade stocks of most of the international enterprises during bank operation hours. The transaction amount of Hong Kong Exchange is expected to be doubled as the economic growth in China and south-east Asia.

The original text was distributed on 9:37pm, 13 February 2011.