Let's be clear. The proposed merger between the Deutsche Börse and the London Stock Exchange is a good idea. There are too many exchanges in Europe and their joint operations are too costly. The traditional exchanges face competition from new trading systems with lower cost bases. Tradepoint, a London-based exchange, plans to go live trading the top European stocks in July and is negotiating with the Swiss Exchange. And Jiway, a merger between OM, the Swedish stock exchange operator, and Morgan Stanley, aims to target private-client brokers.
Exchange links, rather than mergers, have proved not to work in the past. So if the traditional stock exchanges are going to survive, consolidation and ruthless cost-cutting is the only way forward.
However, the problem with this merger is that it is just an idea. Two essential things must happen before it can be implemented. The details of how it will operate must be worked out. And it must be sold to all interested parties. The politics cannot be ignored.The plan in detail: When the merger was announced last month only a few details were revealed of how it would work. The intention is to create two new markets.