Need for cost cuts will drive exchange M&A

By Mathieu Robbins

LONDON (Reuters) - The need to cut costs will force continuing consolidation among stock exchanges as they compete to offer clients a cheap one-stop shop for all their needs, an industry executive said on Wednesday.

While deals like NYSE's (NYX.N: Quote, Profile, Research) (NYX.PA: Quote, Profile, Research) acquisition of pan-European exchange Euronext and Nasdaq's (NDAQ.O: Quote, Profile, Research) buy of Scandinavia's OMX have taken place in recent years, some exchange tie-ups are built around closer collaboration rather than out-and-out M&A.

The London Stock Exchange Group (LSE.L: Quote, Profile, Research) and Tokyo Stock Exchange Group TSE.UL for example in October announced a joint venture to introduce the UK's junior market model in Asia by the end of 2008. But such deals may not be enough for customers.

"The strategic partnerships between exchanges I cannot see delivering that many synergies when you've got the biggest cost base being your technology platform," Richard Evans, Citigroup's (C.N: Quote, Profile, Research) head of electronic execution, told the Reuters Exchanges and Trading Summit.

"To create partnerships between exchanges but not actually to achieve synergies on the platform -- I think there is a big cost reduction that does not necessarily take place in that situation."

Evans added that such a combination of platforms makes further mergers and acquisitions between exchanges necessary.

(Reporting by Mathieu Robbins; Editing by Andrew Callus)