Revenues generated by the main European exchanges have skyrocketed over the past three years, making them considerably more profitable than their U.S. counterparts, Celent says. While profit margins at the NYSE and Nasdaq remained under 10 percent in 2006, European exchanges raked in an average profit of 34 percent, the Boston-based research firm reports.
The leading exchange in terms of revenue and profit is Germany's Deutsche Borse. But smaller exchanges, such as Spain's Bolsa y Mercado Españoles and Norway's Oslo Bors, reported profit margins of nearly 45 percent.
While Celent asserts that European alternative trading systems (ATSs) -- such as Liquidnet, ITG Posit and Instinet Chi-X -- do not currently pose a threat to regulated European exchanges, the firm acknowledges that MiFID could threaten the exchanges' dominance. The regulation, which takes effect in Europe in November, promotes competition among traditional exchanges and ATSs by creating a similar regulatory framework for all venues, Celent notes. In addition to requiring greater pre- and post-trade transparency and best execution, it also eliminates the concentration rules in some European countries -- including France, Spain and Italy -- that currently require all orders to be executed on the national exchange.
Celent also points out that European capital markets still are largely fragmented along national boundaries, despite recent cross-border consolidations and the transatlantic merger between NYSE and Euronext. Celent predicts, however, that more exchange consolidation is likely. "Exchanges operate with considerable fixed costs and limited variable costs, so there is a strong incentive to merge and integrate their trading platforms," the report said. "Thus, we can expect the consolidation to continue in Europe."
Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio