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NYSE and Euronext Plan to Merge Markets


The New York Stock Exchange is merging with a European rival. Euronext owns exchanges in Paris, Brussels, Lisbon, Amsterdam, and London. Now, this $10 billion merger will create the first trans-Atlantic Exchange, and it represents an historic development in the way stocks are traded.

NPR's Adam Davidson is following this story and joins us from New York. Adam, good morning.

ADAM DAVIDSON reporting:

Good morning, Steve.

INSKEEP: It seems that every stock exchange wants to have an overseas partner these days.

DAVIDSON: Yeah, it's a huge trend. And this is the first big step, but we'll be seeing a lot more of it.

I think basically what's happened is there's a combination of technology and business reasons for stock exchanges to get really, really big. If you think of a classic stock exchange where traders meet on a floor, in a physical location, there was a real logic to have them all over the world. You had - in the U.S., you had them in Philadelphia, L.A., San Francisco, Chicago, all over the place. Same with Europe. Same with Asia. But now, with, you know, high-tech fiber optic lines going all over the world, it's much easier to trade these things electronically.

And since the companies spend a fortune getting their trading - electronic trading systems up and running, and then each additional stock they trade only costs a fraction of a penny, since they have all this up front costs, they'd rather trade as many stocks as possible - which means they want to get as big as possible.

INSKEEP: Well, now, if I'm an ordinary investor. I've got a 401k, I've got a mutual fund. What does this mean to me?

DAVIDSON: Well, there are two theories to this. It's so new that no one's quite sure. There's a good theory and a bad theory.

The good news theory is that this will be very good for ordinary investors, because it'll basically mean it'll be cheaper to trade stocks. These new companies will be so huge and they'll be trading stocks so effectively that it'll cost less. Every time your mutual fund buys or sells stocks, it's charged a fee, and now that fee could be less. And that means that there's more money in your 401k when you retire then there would be otherwise.

The bad theory is that, you know, one or two of these companies will become so big that they'll have monopoly power and they'll be able to charge whatever they want. And that means less money in your 401k.

No one knows if it's going to go the good way or the bad way, although the bets are for the good way right now.

INSKEEP: Do time zones have something to do with this? If you've got a global stock exchange, it's always open somewhere?

DAVIDSON: It would be always open somewhere. Now, you know, we do have that situation with currency markets, and you do have these traders in New York and London and Singapore with 24-hour currency trading. And I know some of these guys. They don't sleep much. They, you know, they go to sleep for a couple hours and they can't stay asleep because they're worried what's happening in Tokyo, or whatever. And so I think you will see a lot more sleepless brokers and traders because of this.

INSKEEP: How soon before other global exchanges follow and we have even more sleepless traders?

DAVIDSON: Well, New York's NASDAQ, the other big stock exchange in New York, is trying desperately to buy the London Stock Exchange. That's probably the next one up, probably soon.

I think Asia is going to get into the mix. You have Germany's Deutsche Börse trying to buy something, anything. They tried to buy Euronext and it didn't work.

So I think by the end of the year, you're going to see a lot more consolidation.

INSKEEP: Adam, thanks very much.

DAVIDSON: Thank you, Steve.

INSKEEP: That's NPR's Adam Davidson, sleepless in New York. Transcript provided by NPR, Copyright NPR.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.