Merger Rumored for LSE, OMX

LONDON—The Swedish exchange operator and technology provider OMX, amid news of reorganizations of its business structure, is at the center of increasing speculation concerning a possible deal with the London Stock Exchange (LSE).

Recent media reports indicate that the LSE and OMX have been in extensive talks to merge technology operations.

According to the Swedish newspaper Dagens Industri, the LSE, if it signs a deal with OMX, would move its technology division to Stock holm, and all equity trades for the Helsinki, Copenhagen, and Stockholm exchanges would be routed through the LSE. OMX owns these three Nordic exchanges. Dagens Industri also reports that if the two companies go forward with the plan, it will result in the loss of 130 jobs from OMX and the LSE and savings of £100 million ($172.6 million).

A LSE spokesperson says that the exchange does not comment on rumors and speculations. "The LSE is currently in year three of a four-year technology upgrade program," the spokesperson says. "We recently introduced [the real-time, data-feed platform] Infolect, and we'll be completing the whole road map by the beginning of 2007."

Industry observers cite the difficulties of embracing OMX's systems.

"The LSE is engaged in their technology road map. It's kind of difficult to see the LSE moving on the OMX platform," says Octavio Marenzi, CEO and founder of market researcher Celent Communi cations.

In another twist, according to the Sunday Telegraph in London, the LSE has broken off secret talks with OMX to concentrate on a bid from Australian investment bank Macquarie. The Sunday Telegraph report explains that the talks faltered after the LSE decided to focus on defending against a possible bid by Macquarie.

Officials at the Australian bank made their interest in the LSE clear this past summer, but the firm has not yet put forward a bid. The Takeover Panel, a non-statutory body based in London focused on takeovers and mergers, last week gave Macquarie a deadline of Dec. 15 to declare a bid or announce a decision not to do so. If the bank decides not to put forward a bid, it will be bound to refrain from putting forward an offer for the following six months.

For the past three years, OMXand the LSE have been working together on the Equity Derivatives Exchange (EDX)London, a joint venture to provide exchange-traded and over-the-counter (OTC) derivatives trading (Trading Technology Week, Dec. 16, 2002).

In yet another plot point in the drama, the Iceland Stock Exchange (ICEX) broke off merger talks with OMX, ICEX officials confirm. According to a prepared statement, ICEX has been evaluating the merger and decided it was in its best interest to continue as an independent entity.

OMX officials decline to comment on the reports.

At the same time, OMX is implementing a reorganization that will take effect next month, and that will see the group being divided in three entities instead of the actual two. Currently, OMX Technology and OMX Exchanges form the OMX Group.

The three new divisions, which will start operating on Jan. 1, 2006, are Information Services and New Markets, Nordic Marketplaces, and Market Technology. Information Services and New Markets have been tied together because they are the two highest growth areas for the exchange, according to Anna Rasin, vice president, marketing and communications at OMX. Both will focus on new business opportunities.

Nordic Marketplaces will focus on developing an integrated securities market and will include the OMX exchange operations in Denmark, Finland and Sweden.

Market Technology, the new name for OMX Technology, will continue to focus on delivering marketplace systems and services. It will be led by Markus Gerdien, who previously worked for the Swedish company Observer. In addition, Otters Gard has joined from IBM as the new head of sales, based in Stockholm. Klas Ståhl previously led OMX Technology (DWT, Sept. 26).