Evolution of the Exchange Industry (eBook)

Manuela Geranio is Tenured Researcher in Financial Markets and Institutions and Adjunct Professor of International Financial Markets at Bocconi University, Milan. She holds a PhD in Business Administration. Her research focuses on equity markets, both at the domestic and at the international level, including IPOs, delistings, private equity deals, and exchange market strategies. Recently she cooperated with industry players and regulators in the development of the Italian Stock Exchange.

Foreword 8
Acknowledgments 10
Contents 12
Acronyms 14
Chapter 1: The Exchange Industry: Recent Facts and the Current Scenario 16
1.1 Introduction 16
1.2 The Actual Scenario of the Exchange Industry 17
The Multitude of Players in the Exchange Industry 21
1.3 Market Performance of Exchanges 26
1.4 The Recent Exchange Industry Evolution: Evidence to Explain 28
Chapter 2: The Functions and Economics of Exchange Markets 30
2.1 The Production Process of Exchanges 30
2.2 A Synthetic Framework for the Primary Activities of Exchanges 42
2.3 Revenue Breakdown 44
2.4 The Security Industry from the Industrial Economic Perspective 46
References 49
Chapter 3: Strategic Patterns of Exchanges 50
3.1 Description of Main Players 50
3.1.1 LSEG 50
3.1.2 Deutsche Börse AG 52
3.1.3 Euronext 53
3.1.4 ICE 54
3.1.5 Nasdaq OMX 56
3.1.6 CME Group 57
3.1.7 BATS Global Markets 58
3.1.8 Hong Kong Exchange Group 59
3.1.9 Japan Exchange Group (JPX) 60
3.1.10 TMX Group 60
3.1.11 ASX Group 61
3.1.12 BMandF BOVESPA 62
3.2 More Recurrent Strategies 62
3.3 MandA Activity in the Exchange Industry 66
3.4 The Case for Emerging Markets 73
References 80
Chapter 4: The Surge of Alternative Players in the Trading Field 81
4.1 The Complex Landscape of Trading 81
4.2 Alternative Trading Systems and the Development of Dark Pools 86
4.3 Criticisms on Dark Pools: Markets and Regulators Reply 91
4.4 Systematic Internalizers and Other OTC Players 94
References 95
Chapter 5: The Governance of Exchanges 96
5.1 From dealers´ Clubs to Public Companies 96
5.2 The Actual Ownership Breakdown of Main Players 98
5.3 Potential Benefits of Demutualization 105
5.4 Demutualization and Conflicts of Interest 107
References 110
Chapter 6: Regulation on Exchanges: New Threats and Opportunities 111
6.1 A Snapshot of the Regulation Influencing Competition in the Securities Industry 111
6.2 The Recent Evolution in European Regulations 114
6.2.1 European Market Infrastructure Regulation (EMIR) 114
6.2.2 MiFID Review (MiFID II and MiFIR) 116
6.2.3 MAD Review 119
6.3 The Recent Evolution of US Regulations 120
6.4 Implications for the Exchange Industry 121
References 125
Chapter 7: Issues at a Glance in the Exchange Industry 126
7.1 Price Discovery Process, Data Vending and Trading Fragmentation 126
7.2 The Future of the Security Exchanges 131
7.3 Strategic Indications for Tomorrow´s Exchanges 133
7.4 From Dealers´ Clubs to Multinational Companies: A Tentative Conclusion 135
References 137