NYSE Euronext Answers London Calling With Rival Exchange

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NYSE Euronext

NYSE Euronext (NYSE:NYX) made its presence felt in London as it launched a regulated exchange, NYSE Euronext London, to rival the London Stock Exchange (LSE) for listings, on June 20th, 2012. [1] NYSE has been trying to expand its operations in Europe, but fell short in its earlier bid for the London Metal Exchange, (See NYSE Outbid For LME In Europe, Looks East for Futures) and its planned merger with German exchange operator, Deutsche Boerse AG, was blocked by the European Commission earlier this year. The NYSE operates exchanges in New York and Paris will bring its experience and innovations to resuscitate the IPO market, which has dried up in London. (See NYSE Gets Creative In Trying To Spur Interest In The IPO Market)

See our full analysis of the NYSE Euronext stock here

Next Stop: London

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Groupe Eurotunnel will be the first company to start trading on the NYSE Euronext London, from 19th July. The operator of the channel tunnel between Britain and France has decided to shift its dual listings in the LSE in London and NYSE Euronext in Paris to a single platform to simplify access to its stock and broaden its investor base. The firm’s London listing had been stagnant in terms of trading, and will likely benefit from the increased liquidity afforded by listing on the new exchange.

London, as the perceived financial capital of Europe, has the highest number of listed companies on the continent. Volatile market conditions, particularly with investors worried about the Euro-zone sovereign debt crisis, have seen initial public offerings market slow down in recent times. O1 Properties and Georgian Railways are two of the anticipated listings in London, which have decided to reconsider their positions.

The European markets are at a pivotal moment with a pro-austerity result in the Greece elections [2] and a bail-out all but imminent in Spain. [3] However, we expect listings to pick up once the crisis is resolved and companies feel more comfortable about returning to the market.

Derivatives Set To Grow

NYSE already has a foothold in London as its derivatives trading platform and clearing business NYSE Liffe operates in the city. We expect the business to do well as derivative trading is preferred over cash products by investors in the uncertain market conditions. Increased transparency and standardization while trading, afforded by the European Union’s regulations, have inspired investor confidence in the derivatives market.

Our price estimate for NYSE Euronext’s stock is $34, approximately 40% above the current market price

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Notes:
  1. UPDATE 2-NYSE Euronext to rival LSE for London listings, Reuters, 20th June, 2012 []
  2. Greece election results: Pro-bailout parties look to forge coalition, Economic Times, June 18th, 2012 []
  3. Spain full-blown bailout all, but inevitable: Analysts, Economic Times, June 21st, 2012 []