NYSE Expands Global Strategy to India

Ivy Schmerken, Wall Street & Technology

Expanding its global reach to Asia, yesterday, NYSE Group announced that it has agreed to acquire a five percent stake in the Mumbai-based National Stock Exchange of India Limited (NSE). The parent of the New York Stock Exchange will pay $115 million in cash for the shares being purchased from a consortium of selling shareholders.As noted in today's Wall Street Journal, the NYSE is not alone in making this investment. Broker-dealer Goldman Sachs, private-equity firm General Atlantic LLC as well as Soft Bank Asian Infrastructure Fund have each purchased 5 percent stakes in the Mumbai-based Indian exchange, bringing the combined investment up to 20 percent.

According to Wikipedia, as one of the largest and most advanced stock markets in India, the NSE of India is the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India.

The exchange commenced Internet trading in 2000 and in 1996 was the first exchange in India to propose trading equity derivatives on a stock exchange index and also became the first exchange in India to trade exchange-traded funds (ETFs).

Even while NYSE is in the final stages of completing the NYSE-Euronext transatlantic merger, having won shareholder approval from both sides in December, there appears to be a relentless need to link up with other international markets.

"Our investment in India's National Stock Exchange complements our global growth strategy," stated NYSE Group CEO John Thain in the release. "Through a mutually beneficial partnership," Thain said, "NSE, NYSE and the future NYSE Euronext will extend our global reach, strengthen relationships with customers and advance our competitive position in India and throughout the region."

The Big Board currently lists 10 companies from India whose total global market capitalization is approximately $76 billion, noted the release. But obviously with the investments the NYSE has been making in electronic trading infrastructure and networks, the idea of routing orders to India in milliseconds or listing ETFs based on a basket of Indian stocks is not all that far fetched. Remember NYSE Group back in September of 2006 took an equity stake in Marco Polo Network - which routes orders and connects to brokers and exchanges in 40 countries.

An Accenture study released in December 2006, titled "Stormy Waters," addresses the state of exchanges, and predicted China and India will become the most important growth hubs for the securities business in the medium term. "Exchanges will need to ready themselves to share in that growth potential," said the report. Of the 22 stock exchanges operating in India, Accenture says the most important ones are the National Stock Exchange of India and Bombay Stock Exchange Limited, which jointly account for over 99 percent of trading volume. Accenture also predicted that India's 20-plus exchanges would consolidate down to just two or three central trading hubs in the medium term. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio