The London Stock Exchange and the German Boerse announced a merger that will create the largest European securities exchange. The total worth is expected to be more than $30 billion with a straight conversion. There were rumors about the proposed deal that came forth last month, but it has now been made official and has been agreed upon by all of the parties involved.
The details of the merger place 45.6 percent of the assets in the hands of the former LSE, with the remaining 54.4 percent going to the German exchange. That places control in Germany, but that is simply because the majority of the assets were already under their leadership. The new company will be located in the UK, and will be called UK TopCo. This deal took 16 years to finalize after Frankfurt officials first tried to take over the LSE. This sensible resolution will create a much stronger entity than a hostile takeover would have, and the timing is far better to deal with economic issues.
The tenor of the markets should not change noticeably over time because of this consolidation. If anything does happen, it will simply add more stability to the management of the stock exchanges, spreading out the risk and increasing confidence within the big banks and financial firms. The big benefit of combining these exchanges is that it gives European markets more of an advantage of the New York Stock Exchange, which has long dominated the world’s marketplace. There have been concerns about U.S. exchanges beginning to takeover European “turf” and having a mega exchange like this gives Europe a chance to hold their own. The short term impact is likely to be pro-European, but it is still too early in the trading day to see what happens in U.S. markets.
As a binary options trader, this creates some interesting opportunities, especially if you look at indices. The FTSE 100 is up noticeably by almost 0.5 percent, and this is likely to be a trend for a few days, at least until the excitement of the merger wears off. This could last as long as a week, but that’s not likely considering that the U.S.’s Federal Reserve has the conclusion of a meeting scheduled for Wednesday and other economic events are on the calendar in the U.S., too. These have the ability to trump European news, even if they are not all that big in their nature. News events can be fickle, swaying markets when they shouldn’t. This is something that short term traders need to be aware of, especially those with limited timeframes like binary traders have. Despite this, knowing that European markets have taken a big long term gain out of all of this should help you to construct a long term outlook for how to approach this new development.
On the flipside, do pay attention to currencies, too. This merger is likely to hurt both the euro and the pound sterling over the short term, giving the strong dollar an even bigger advantage. This effect will subside quickly, but being able to place trades that take advantage of this artificially imposed trend will be advantageous. Things like this make it so important for all traders—binary, Forex, whatever—to follow the news and know how to interpret it. If you don’t do this, you are missing out on profitable opportunities constantly.
One final question that pops up here is: should traders that rely on U.S. exchanges worry? Most people will be completely unaffected by this, so no. Those that do have the potential to be impacted shouldn’t worry either, as there are no signs that this is more than European markets combining in an effort to protect themselves at this moment.