The Chicago Trib’s Susan Diesenhouse interviews several people on the implications of the incipient NYSE-Euronext tie up for the Chicago derivatives exchanges. Columbia’s John Coffee opines: “”This is going to put a burden on the CME and CBOT to make their own bids to become multiproduct exchanges because the NYSE has engaged in a market-extending merger.”
Pardonez mon francais, but that makes no freakin’ sense whatsoever. NYSE’s Thain made it clear that he wanted to get into derivatives–as he has done by merging with Euronext and its LIFFE derivatives exchange–primarily because they offered higher growth potential, higher margins, and less competition than NYSE’s core equity business. So the king of the high margin, high growth, low competition derivatives space–the CME–is supposed to respond to the NYSE effort by acquiring a low margin, low growth, high competition equity business so that it can be a multiproduct exchange just like the NYSE? Huh?
I’ve heard it said that imitation is the sincerest form of flattery, but in this instance, for the CME to imitate the NYSE would be the sincerest form of stupidity. If anything, the NYSE’s move shows that the CME–and to a considerable extent, the CBT–are in the cat bird seat. The NYSE believes that it has to get where the CME and CBT already are–and feels compelled to buy rather than build its way into the derivatives space. Why should the Chicago exchanges dissipate their resources by moving into an already highly competitive equity market?–an equity market that in the US is becoming more competitive all the time due in large part to RegNMS.
Chicago shouldn’t feel threatened by the NYSE action–it should feel honored. Just keep on doing what you do so well on LaSalle St. and Wacker Drive and let the others play catch up. Chicago rules! Except for the Cubs.