(Corrects paragraph 12 to say HKEx, not LSE, bought LME)
By John McCrank
NEW YORK, March 14 (Reuters) - When top derivatives exchange
executives gather in Boca Raton, Florida, this week for a major
industry conference, the buzz will be around who is meeting whom
in hotel rooms and lobbies as bourses scramble to find partners
amid global consolidation.
Waves of exchange tie-ups and attempted takeovers have
happened every two or three years since exchanges began to go
public in the 1990s, and this year has not disappointed.
Deutsche Boerse DB1Gn.DE said late last month it may merge
with the London Stock Exchange LSE.L in a deal that would help
it compete against larger rivals CME Group CME.O , Hong Kong
Exchange 0388.HK and Intercontinental Exchange ICE.N .
Deutsche Boerse Chief Executive Carsten Kengeter has said he
has alternatives if the LSE deal fails.
As merger talks heat up, no one wants to get left behind in
a business where scale, and geographical and cross-asset reach,
can greatly improve profit margins.
"If the LSE-Deutsche Boerse talks were the start of the
conversation, we've probably got another few more shoes that are
going to drop in the next six months," said an executive from
one exchange who declined to speak on the record because of the
sensitive nature of deal talks.
An executive from another exchange said to expect two to
three more deal announcements before the end of the year.
Right now, the focus is on LSE, with New York Stock Exchange
owner ICE publicly mulling a rival bid. CME was also said to be
considering its options, raising the prospect of a takeover
battle.
In 2007, the sprawling, pink, palm tree-adorned Futures
Industry Association conference hotel in Boca Raton was the
backdrop to an attempt by ICE Chief Executive Jeff Sprecher to
derail CME's bid for No. 2 U.S. futures market, CBOT Holdings.
ICE employees slipped copies of the exchange's $9.9 billion
counter-offer letter under the hotel doors of CBOT's chairman
and its CEO. Stacks of an accompanying press release were placed
throughout the hotel. CME was forced to raise its offer to
stave-off ICE.
This year, Sprecher is one of many exchange leaders on the
attendee list for FIA Boca, which runs from Tuesday to Friday.
WHO'S LEFT TO DANCE?
Hong Kong Exchange CEO Charles Li, who is also listed as
attending Boca, said on March 2 he was closely watching the LSE
talks and that HKEx would look at any opportunities that would
add value to its company. HKEx bought the London Metal Exchange
in 2012 for $2.2 billion.
Also in Asia, Singapore Exchange SGXL.SI said in late
February it had made a bid for the London-based Baltic Exchange,
the hub of the global shipping market. The Baltic Exchange said
it has recently held talks with many suitors.
SGX attempted to buy Australian exchange operator ASX Ltd
ASX.AX in 2011 for $8 billion, but the Australian government
blocked the deal, saying a foreign takeover of ASX would not be
in the country's interest.
That deal would not prevent ASX from buying SGX, however,
both of which have market capitalizations of a little over $8
billion, sources said.
A potentially better consideration for ASX might be Canada's
TMX Group Ltd X.TO , said Andre Cappon, president of financial
services consultant CBM Group. "That would make a lot of sense
because Australia and Canada are similar economies with mining
and energy," he said.
LSE attempted to buy TMX in 2011 for $3.7 billion, but the
bid fell apart amid nationalist concerns and a rival bid from a
group of Canadian banks.
One recent deal that caught many by surprise was Nasdaq
Inc's NDAQ.O $1.1 billion acquisition of International
Securities Exchange from Deutsche Boerse last week. Nasdaq said
it would wring $300 million in cost savings from ISE through the
integration.
Another exchange operator, CBOE Holdings CBOE.O , has long
been a potential takeover target, but seen as expensive because
of the premium placed on the proprietary products that trade on
its platform. An acquirer may look at the Nadsaq-ISE deal and
see even more potential for cost cuts from a CBOE tie-up, one of
the exchange executive sources said.
Separately, BATS Global Markets, which merged with Direct
Edge in 2013 to become the No. 2 U.S. stock exchange operator,
is planning an initial public offering later this year, which
could give it deeper pockets to strike more deals of its own.