Pair combine to create exchange giant

Though dressed up as a merger, the deal, which values NYSE at about $10.2bn, is effectively a takeover, with 60 per cent of the new company to be owned by the German company’s shareholders and 10 of 17 board seats bound for the Frankfurt group’s management.

But while no name has yet been given to the combined group, the two parties have reached one important compromise.

The group will have headquarters in both New York and Frankfurt.

And in a bid to keep worried US lawmakers happy, the chief executive role will go to NYSE head Duncan Niederauer, while Reto Francioni of Deutsche Boerse will become chairman.

The combined powerhouse will have more than $20 trillion in annual trading volume and operations in Germany, France, Britain, Amsterdam, Portugal, Belgium, and the United States.

Under the terms of the deal, NYSE Euronext stock will be exchanged for 0.47 shares in the new company, while Deutsche Boerse shares will be swapped on a one-for-one basis, the exchanges announced in a statement yesterday.

At a 60-40 ownership split, the 55 per cent of shareholders in a combined company would be from the United States, with 11 per cent from Germany, 11 per cent from the UK and 23 per cent from the rest of the world, a source familiar with the deal said.

The exchanges face intense competition in their traditional stock-trading business from younger trading venues geared towards today’s increasingly dominant high-speed electronic traders.

NYSE and others have responded by investing heavily in technology and moving into more profitable derivatives trading.