Exchange mergers only just beginning

At the Reuters Future Face of Finance Summit on Monday, top executives said the world's trading platforms and clearinghouses will continue to band together as the wave of consolidation that swelled this month will grow stronger.

A senior U.S. Treasury official, meanwhile, said the planned acquisition of the New York Stock Exchange parent by Germany's Deutsche Boerse AG (DB1Gn.DE) did not pose any immediate national security concerns.

The comments, at the Reuters Summit in London and Washington, suggest the emerging group of trading powerhouses will grow even larger -- and that they will eventually overcome any hurdles to cross-border consolidation of capital markets.

"This is like a game of chess where the first moves will take a while to play out, but there will be further consolidation as exchanges look to build the economies of scale to compete with us on price," said Alasdair Haynes, chief executive of trading platform Chi-X Europe.

In less than three weeks, Deutsche Boerse announced a bid for NYSE Euronext (NYX.N), London Stock Exchange (LSE.L) bid for Toronto Stock Exchange parent TMX Group Inc (X.TO) and BATS Global Markets said it would buy fellow privately-owned venue operator Chi-X Europe.

The frenetic 10-day rush revived a consolidation wave that last swept exchanges between 2006 and 2008 and raised some thorny questions over whether politicians and regulators would ultimately block them.

"I don't have any national security concerns on this at the moment," Deputy U.S. Treasury Secretary Neal Wolin said of the deal that would see the Big Board swallowed up for $10.2 billion.

The U.S. Treasury Secretary chairs the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments to ensure they pose no threat to national security and has the power to block business deals.

Regulators and politicians globally will have to sign off on the array of planned mergers within their boundaries -- including Singapore Exchange's takeover of Australia's ASX Ltd (ASX.AX), announced last year.

"It's evidence again that capital can flow out of this country with a keystroke," said U.S. Congressman Jeb Hensarling, vice chairman of the House Financial Services Committee.

Hensarling warned that the sweeping Dodd-Frank Wall Street reform legislation would hurt the competitiveness of the United States and suggested the bill's over-the-counter swaps reforms could have played a role in NYSE Euronext looking for a merger partner.

Exchanges and clearinghouses figure to benefit as lawmakers and regulators in North America, Europe and Asia drive far more swaps through more transparent operations.

Simon Lewis, chief executive of the Association for Financial Markets in Europe (AFME), said the banking lobby has no issue with the Deutsche Boerse-NYSE Euronext merger, which if allowed to go ahead will have some 90 percent of the European futures market.

Lewis also said AFME has no plans to ask European Union competition authorities for safeguards. Banks, the main users of exchanges, will be looking for lower tariffs, more orderly markets and greater efficiency from mergers, Lewis added.