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By 2012, the exchange-trading business will be dominated by five global powerhouses marketing a range of services to the securities industry, according to forecasts from TowerGroup.
TowerGroup expects the global exchange market to be dominated by five major players - Nyse, Nasdaq/OMX, London Stock Exchange, Chicago Mercantile Exchange, and Eurex - each with the ability to trade seamlessly around the world.
To survive in a consolidating market, the exchanges will have transformed from simple utilities focused on matching buyers and sellers, to broad service providers to the securities industry, says the analyst house.
TowerGroup estimates revenue from trade execution for Nyse and Nasdaq will decline from 48% and 69% respectively in 2007, to 30% and 38% respectively by 2011.
The new services that exchanges will offer include: trading software; new data products; a new market for trading private securities; technology outsourcing; and hosting.
Interestingly, these are all markets currently targetted by the big sell-side investment banks.
With demutualisation loosening the ties between exchanges and their former paymasters, TowerGroup believes by 2012, leading exchanges around the globe will broadly define their value proposition as a focus on serving the investing and financial management needs of the retail and institutional investor.