Value and Governance in the Exchange Industry: the Case of Diversified Conglomeral Exchanges’

The exchange industry undergone in last years a process of rapid change starting with the listing of major exchanges. Technological developments and regulatory reforms contributed to the falling of national trade barriers and gave rise to growing competition which forced incumbents to react with cross-border mergers. The consolidation process in the securities industry followed a pattern of heterogeneous mergers aimed both to widen liquidity and diversify the business model. This would give rise to cost and revenue synergies leveraging on the joint use of common trading platforms and the development of cross selling opportunities, respectively. Nevertheless, mergers hide some threats as cuts in earnings and cash flows due to increasing competition may adversely affect goodwill and the capital base for exchanges going forward with sizable acquisitions. Governance arrangements at securities industry level turn also to be redefined, giving rise to widespread links between operators which may undermine the full exploitation of expected synergies.