Qatar Deal Reflects NYSE's Emerging Technology Business
June 24, 2008
NYSE Euronext’s announcement today that it is forging a strategic partnership with--and taking a minority stake in--the Doha Securities Market (DSM) of Qatar comes as the transatlantic exchange operator is seeking to transform itself into a major technology vendor.
Under the deal, expected to close in the fourth quarter, NYSE will obtain a 25 percent stake in DSM for $250 million, its largest investment in a foreign exchange. Qatar will retain--through the Qatar Investment Authority--the remaining 75 percent of DSM, which lists 43 companies and has seen its total market capitalization climb to $136 billion, up from $5.2 billion in 2000. DSM began operations as a floor-based system in 1997, before becoming automated in March 2002.
The partnership is expected to help the Qatar exchange develop into a diversified financial market. NYSE says it will leverage its technology and product expertise to enhance DSM’s current cash equities business, construct a derivatives trading platform and post-trade services, and bolster governance and transparency levels to bring the exchange up to international best practices.
“This partnership lays the foundations for us to build Doha into a world-class financial center,” said Sheikh Hamad bin Jassim bin Jabor Al-Thani, prime minister and minister of foreign affairs of Qatar, in a statement. “Our country’s financial markets will be an integral part of a group which links together the world’s major trading centers across the U.S. and Europe and now the Middle East.”
Cross-border mergers and partnerships between exchanges have spread like wildfire over the last few years. Besides NYSE Group’s merger with Paris-based Euronext, consummated in December 2006, Nasdaq Stock Market closed its acquisition of OMX Group, a technology provider and operator of seven Nordic exchanges. Meanwhile, Deutsche Borse’s Eurex derivatives exchange finalized its purchase of the New York-based International Securities Exchange in December 2007.
In February, NYSE Euronext announced it had agreed to pay about $56 million for a 5 percent interest in the Multi Commodity Exchange of India, the country’s largest commodities exchange. Last year, NYSE bought a 5 percent stake--the maximum allowed under Indian law--of the country’s largest securities market, the National Stock Exchange, for $115 million.
Deutsche Borse and the London Stock Exchange (LSE), in which Qatar’s sovereign wealth fund holds 15 percent, reportedly also bid on DSM. Deutsche Borse runs electronic cash equities and derivatives exchanges, while LSE operates Europe’s largest equities exchange.
Qatar’s selection of NYSE Euronext may be due in part to the breadth of the exchange company’s product offerings. Although the details have yet to be worked out, according to an NYSE spokesperson, DSM’s integrated equities and derivatives exchange is anticipated to borrow components from NYSE Euronext’s existing trading platforms--Nouveau Système de Cotation (NSC) for European cash equities, Liffe Connect for derivatives, and the NYSE Arca equities and options electronic venue.
In December 2007, NYSE said it had acquired consulting and integration firm Atos Origin’s 50 percent stake in AtosEuronext Market Solutions (AEMS), taking full ownership of the NSC and Liffe technology, as well as the management and development services supporting those platforms and AEMS’ third-party exchange technology business.
Over the last year, NYSE Euronext also completed acquisitions of TransactTools, a provider of enterprise messaging solutions, and Wombat Financial Software, which offers data management solutions. In March, these pieces were bundled into Advanced Trading Solutions, a division designed to sell customized exchange and trading-related solutions. That unit will be leveraged to build the DSM facility, according to the spokesperson. “Doha will take advantage of these resources and others,” she said.
