U.S. Forces NYSE Into German Arms

U.S. officials squelched a proposal to keep the New York Stock Exchange an American corporation on Monday because the resulting monopoly would not be in the interest of the public. But how is the alternative—selling the family jewels to a foreign rival (Deutsche Börse)—in their interest?

Antitrust regulators threatened to file a lawsuit against the proposed Nasdaq-nyse merger if company officials decided to proceed with the deal. Justice Department officials worried that combining nyse and Nasdaq operations would create an unacceptable monopoly in domestic share listings and other services.

Nasdaq and partner omx had offered $11 billion for the nyse Euronext group, which owns the stock exchanges in New York, Paris, Amsterdam, Lisbon and Brussels, as well as a highly sought-after derivatives exchange.

Following the strong opposition from U.S. authorities, Nasdaq withdrew its offer to keep the nyse in the American family. It is now almost inevitable that Deutsche Börse will end up owning this American corporate jewel. Deutsche Börse has offered $9.8 billion for the nyse Euronext company.

And from Germany’s perspective, it couldn’t have come at a better time. With much of the periphery of Europe in economic crisis, Germany is pushing for greater economic union—on its terms. In return for bailout money, Germany is forcing indebted countries to turn over national sovereignty. Gaining ownership over the largest stock exchanges in Europe will just add additional firepower to Germany’s already impressive financial weaponry. In the months and years ahead, the European Union is set to become a much more German-looking institution.

If this merger goes through, the stock exchanges in Amsterdam, Paris, Lisbon, Brussels, Frankfurt and nine other European countries will all fall under control of Germany’s Deutsche Börse. And that is not all.

Deutsche Börse will also gain control of the former Euronext derivatives unit Liffe. Once combined with Deutsche Börse’s derivatives units, the new company will dominate the global derivatives market, which the Bank of International Settlements estimated at an astounding $1.28 quadrillion notional value in 2008.

At Deutsche Börse’s corporate shareholder meeting last Thursday, supervisory board chairman Manfred Gentz reiterated that the new merged company would be the ideal partner for other stock-exchange operators such as those in Latin America. “The merger will bring Deutsche Börse in a very good position to play a leading role in the further consolidation process” in the industry, Mr. Gentz said.

Americans will want to ask themselves which was the lesser of the two evils. Is it really better for America to allow one of its crown corporations to be sold to a foreign competitor than allowing the creation of a national champion of its own, even if it had a virtual monopoly over share listings?

Americans will also want to ask themselves, why isn’t the nyse the company doing the purchasing, as opposed to the one being purchased? Why has America’s premier stock exchange become prey as opposed to the predator it once was? What is wrong with America?

The truth is that the fall of the nyse is a warning about the direction America is headed. For more, read “The Real Reason Germany Wants to Buy the NYSE.”