TORONTO (Dow Jones)–The proposed merger of NYSE Euronext (NYX) and Deutsche Boerse AG (DB1.XE) presents both threats and opportunities for rival exchanges, said the chief executive of London Stock Exchange Group PLC (LSE.LN).
“On paper, the combination of two such very large companies represents a challenge to anyone,” said Xavier Rolet, in a joint interview with Tom Kloet, chief executive of Toronto Stock Exchange operator TMX Group Inc. (X.T), just hours after the companies had announced their own planned merger.
“When a big company comes together, there are clearly some threats, but there are also opportunities” for rivals, said Rolet. Those include picking up employees who leave or clients who become “disaffected” if integration of the different pieces isn’t handled smoothly, the two CEOs said.
The proposed LSE-TMX merger shouldn’t produce such tumult, since there’s relatively little overlap between the businesses of two sets of exchanges, the pair said. The combination is “focused on revenue synergies, not on cost synergies,” said Rolet.
Rolet also said the NYSE-Deutsche Boerse news “vindicates our approach as partners coming together to improve our competitive position in a world that’s getting smaller” as exchanges consolidate.
The NYSE-Deutsche announcement came less than an hour after Rolet and Kloet held a joint press conference on their own proposed merger, which would create a group with combined revenue of around $1.6 billion, overseeing 6,700 listed companies. After the merger, LSE shareholders will hold around 55% of the combined company and TMX shareholders 45%. The group’s exchanges will continue to operate under their respective local regulators.
In their Toronto press conference Wednesday, the heads of the two bourses stressed the balance they were trying to strike between the various regional financial centers they represent — a group that includes the Italian bourse, which accounts for half of the LSE group’s revenue, and powerful Canadian securities bodies in Montreal and Calgary as well as Toronto.

Although the London-based Rolet will head the merged company, Kloet in Toronto will be president, and the board will consist of eight directors chosen by the LSE and seven by the TMX. The new group will base its global equities listing business in Toronto, its derivatives business in Montreal, its energy business in Calgary and its fixed income and equities-trading business in Milan, the two said.
The emphasis on regional centers is important — not only to play to existing strengths, such as the Toronto Stock Exchange’s leading position in financing mining startups — but also to appease local interests and securities regulators who could be fearful that control over their financial markets is slipping to another part of the world.
“This is the shape of things to come — this is the brave new world we’re going into, where a global financial governance is likely to appear,” said Rolet. “Our company will reflect that.”
The LSE and TMX estimate the combined entity will generate additional annual revenue of C$56 million (US$56.5 million) in the third year after the transaction is completed and C$160 million annually after year five, betting it will attract more listings and investors, as well as offer an opportunity to expand their index and clearing businesses. Cost-savings from combining technology platforms among other initiatives are expected to help the new venture reach an annual run rate of C$56 million by the end of the second year.
Kloet said the combined entity will be able to take advantage of LSE’s 50% ownership in the FTSE indexes to develop new derivatives and other financial products as a way of generating additional revenue. TMX’s suite of bond indexes could also be exported outside Canada as a new revenue source. By combining clearing functions, the entity could augment revenue by making its easier for brokers to trade with a wider group of investors globally, Kloet said.
The two also hope to make it easier for companies to cross-list on their exchanges.
One key hurdle for the deal will be regulatory, since the merger will have to pass muster not only with securities regulators in the U.K. but also regional regulators in Ontario and famously finicky Quebec.
The companies also expect the deal to be reviewed by the Canadian government under rules that require foreign investors to show their takeovers will benefit the country. The government used those rules last year to veto the proposed hostile acquisition by BHP Billiton (BHP) of fertilizer giant Potash Corp. of Saskatchewan (POT) — a deal that had provoked significant popular resistance in Canada. Rolet and Kloet said they’re already working on undertakings they can submit to the Canadian government to prove the deal’s value to the country.
The deal is going to be “challenging for the parties,” from a regulatory-approval perspective, said Tony Baldanza, a senior partner at Toronto law firm Fasken Martineau and an expert on foreign investment law.
The Quebec provincial government said it will study the proposal with an eye to ensuring that any deal guarantees Quebec companies continue to have access to capital. It would also need to make sure Quebec investors are protected and that the expertise of TMX’s Montreal derivatives exchange is “protected and enhanced.”

The London Stock Exchange is in advanced merger talks with TMX Group, Canada’s largest exchange company, in the first big
strategic move by Xavier Rolet, chief executive to secure the future of the UK bourse, the FT reports. The combined group, which people close to the situation said would be worth stg5.5bn ($8.8bn), would be the largest platform for mining company listings at a time of surging commodities prices, the paper says. It would also be the world’s largest exchange by numbers of companies traded.

LONDON (Dow Jones)–France has set initial price guidance on its planned euro-denominated benchmark bond at 21 to 24 basis points over the July 2022 French government bond, one of the banks running the sale said Wednesday.
The new bond will mature July 25, 2027, and is linked to the European index of consumer prices, excluding tobacco.
Barclays Capital, BNP Paribas, Credit Agricole, HSBC Holding PLC and Royal Bank of Scotland Group PLC are joint-lead managers of the issue.
The country is rated triple-A by all three major ratings agencies.

LONDON (Dow Jones)–The U.K. treasury announced Wednesday that it has picked Hong Kong’s former top securities regulator, Martin Wheatley, to head up its new consumer agency, the Consumer Protection and Markets Authority.
The appointment leaves Wheatley as one of the key participants in the new regulatory architecture that Prime Minister David Cameron’s government is establishing.

Wheatley will move to the Financial Services Authority in September before transitioning to become head of the new CPMA, Financial Secretary to the Treasury Mark Hoban told lawmakers Wednesday afternoon.

Wheatley’s last job was chief executive officer of Hong Kong’s Securities and Futures Commission, where he earned a reputation for tackling market abuse more aggressively than his predecessors. Before that, he spent 18 years at the London Stock Exchange Group PLC (LSE.LN), including a stint as deputy chief executive officer.
The CPMA is one of the new agencies the government is creating as part of its plans to scrap the Financial Services Authority and hand financial supervision powers back to the Bank of England.

Under changes due to be fully implemented next year, the CPMA will oversee consumer protection issues while there will also be a new financial crime agency.

Wheatley’s six-year tenure in Hong Kong coincided with massive growth in Asian trading markets and the financial crisis of 2008 and 2009 that left Hong Kong relatively unscathed.

Is the financial crisis has brought great changes? That was my question at the annual meeting of World Economic Forum in Davos last week, wrote in a comment the Financial Times Martin Wolf, which was announced by Foreign Policy magazine as one of the most influential thinkers in 2010

The answer I received was positive. Above all, the financial crisis accelerated the coming of our future.

Past three and a half years since the financial crisis began, and a little more than two years of its worst moment. Bob Diamond, chief executive of Barclays, thanks on behalf of the financial sector in Davos for governments to rescue. Now cautious optimism prevails. According to IMF the world economy grew by 5% in 2010 in purchasing power parity (PPP) and 3.9 per cent at market exchange rates. This contrasts with a decline of 0.6 percent and 2.1 percent respectively in 2009. The IMF expects growth to slow slightly to 4.4 per cent of PPP and 3.5 per cent at market exchange rates in 2011 optimism still reigns.

While the crisis fades into memory, how historians will appreciate its heritage? Journalists do not have the luxury of time so that will give their assumptions, starting with the possible twists in some major trends, the author writes.

The crisis has not grown into a depression, nor was the beginning of the end of capitalism. It has led to tightening financial regulation, especially in banks, although this happens with the existing intellectual and institutional framework. After three decades of deregulation movement in the opposite direction, though not without resistance from the banking sector.

The crisis has also launched a cycle of debt reduction in private sector high-income countries. The ratio of gross private debt to U.S. gross domestic product grew by 123% in 1981 to 293% in 2009. By the third quarter of last year the ratio fell to 263 per cent. The financial sector led in both cases: the gross financial debt in the sector rose from 22% of GDP in 1981 to 119% in 2008. It decreased to 98 percent in the third quarter of 2010. Indebtedness will likely continue to fall. Even if it does not, such other period of growing debt seems unthinkable.

In the short term crisis led to a reversal of global imbalances. The IMF expects a partial back, although the size of the imbalances do not return to its pre-crisis levels. One particular feature of these imbalances – the accumulation of foreign reserves, particularly from China, has not changed: from February 2009 to October 2010 foreign exchange reserves increased by 2 trillion. dollars worldwide, China accounted for 849 billion dollars. This is dangerous for the economy.

The crisis revealed the vulnerability of the area to excessive accumulation of debt in the private and public sector caused by the surplus of savings invested in bad investments by poorly capitalized financial institutions. Managing the process of debt reduction will be very difficult, especially without an internal exchange rate flexibility.

Now let’s look at the trends for the crisis was far more of the accelerator.

The most obvious change is fiscal. Every well-informed person knows that aging will cause difficulties in the fiscal sector of high-income countries, as costs rise and growth slows. The crisis has pushed this process forward a decade. According to the IMF’s net debt of the seven largest economies with high incomes will rise from 52% of GDP in 2007 to 90 per cent in 2015 This does not mean bankruptcy or hyperinflation, but the management of public finance policy will result in the foreseeable future . This will be a difficult experience.

Just as important is the accelerated change in global economic balance. If the GDP of a country is fixed at 100 in 2005, it rose to 105 in the U.S. in 2010, 104 in the euro area and 102 in Japan and Britain. But in Brazil is 125 in India is 147, and China is 169. “Crisis? What crisis?” Must be the reaction in China and India.

According to the IMF’s share of developed economies in world GDP at PPP was 63% in 2000. He fell to 56% in 2007 on the eve of the crisis and to 53% last year and is expected to decrease and less than 50% in 2013. At the same time China and India will increase their share, their growth will be accompanied by a growing pressure on natural resources, which can only become greater.

What crisis accelerated even more sharply is the change in attitude towards the West and the United States in particular. As some analysts note, Asians are no longer respecting West due to its mission, which was compromised by failures in the military, and then in the financial field. Along with the change of attitude change and responsibility. The transition from the G-7 and G-8 to G-20 at the height of the crisis symbolizes this transformation. This would have happened anyway. But change occurs much faster as a direct result of the crisis.

What struck me more in Davos, is uncertainty emphasizes Woolf. After a long private discussion whether the U.S. can avoid Japan’s fate became clear that most people consider it unthinkable. However, in 1993, few expected the deterioration of Japan to continue. What will be the reduction of debt in the private sector without the agony is not clear. The chance for a new economic weakness is greater. Bigger is that of financial distress, perhaps in response to fiscal problems. The mood for the euro area is more optimistic, but how currency bloc will emerge from the difficult position is not clear. European leaders have defined the goal: the survival of the euro area. Whether and how it will achieve at this stage is unknown.

The fact that the crisis has catapulted the world into its future, creates great uncertainty. It stems from the fact that China has no clear plan for global economic and political system. Provided, however, that China is able to maintain its rapid growth, this colossus will have to develop its own ideas about soon. After winning its glory, the country willy-nilly will have to take after the crisis and the responsibility entrusted to it.

The crisis has not been a big turning point, at least so far. But we can not conclude that it is a low priority because some transformations bring, many acceleration of past trends, especially large uncertainty that remains ahead.

Oil prices rose for a second day after anti-government protests in Egypt ozhestochiha and took another victim, again increasing concern about the disruption of oil supplies worldwide.

Through the Suez Canal in Egypt carries about 2.5 percent of world production of crude oil, which comes mainly from the Middle East. Moreover, civil unrest in Egypt could grow into civil war and cause conflicts in other Middle Eastern countries, market analysts to comment on Bloomberg.

U.S. light crude for delivery in March rose by 0.6 percent to 91.41 dollars a barrel in electronic trading today. Its price rose 9 cents yesterday to 90.86 dollars per barrel.

Over the past 12 months price was raised by 19 per cent.

Brent crude, meanwhile, dealt with an increase of 0.9 percent to 103.26 dollars a barrel, its highest price level since September 2008 price was raised by 6% over the past five days.

Higher price levels of Brent are explained by analysts that Europe and Asia more vulnerable than the U.S. from any disruption of supply of oil. Moreover, large reserves of U.S. crude oil, which increased by a further 2.59 million barrels to 343.2 million barrels last week, also kept the price of U.S. oil lower.

LONDON (Dow Jones)–The U.K. government should press on with its budget-tightening plans even though it will find the spending cuts “formidably hard” to carry out, the Institute for Fiscal Studies said Wednesday.
Presenting updated forecasts ahead of the government’s annual budget statement next month, the influential think tank said that if growth holds up as officially projected, the treasury would need to borrow less than it expects.
However the IFS said the government faces “considerable risks” to its ability to pare back the deficit as planned, partly because growth could be slower.

The spending cuts are much more ambitious than the austerity imposed after the previous recession in the 1990s, the institute noted.

Chancellor of the Exchequer George Osborne has outlined GBP81 billion in savings, part of a GBP111 billion fiscal tightening aimed at eliminating the U.K.’s structural budget deficit by 2015.
The IFS said cuts in some parts of government–like the Home Office and the Ministry of Justice–will lead to a downsizing of the workforce that will be “difficult to achieve cost-effectively on the proposed time scale.”
Still, the IFS recommended the government stick to its plans for now.
“Any fiscal loosening aimed at helping the economy could be ineffective if it prompts an offsetting monetary tightening and risks undermining investor confidence that the remainder of the fiscal consolidation plan…will be delivered,” the think tank said.

It said the government should clarify the circumstances in which it would tone down its austerity plans,
The government argues the fiscal tightening is crucial if the U.K. is to avoid the debt woes afflicting other European nations, but the opposition Labour party says the cuts could send the U.K. back into recession.
Worries about a double-dip recession increased last month when official data showed the economy contracted 0.5% on the quarter in the final three months of 2010. That was the first fall in output in over a year.

LONDON (Dow Jones)–U.K. Prime Minister David Cameron said Wednesday that he agreed with U.S. President Barack Obama that the political transition in Egypt should be rapid and credible and needs to start now.
Egyptian President Hosni Mubarak vowed Tuesday that he wouldn’t seek re-election in the autumn after hundreds of thousands of demonstrators took to the streets across Egypt in recent days to denounce his 30-year rule.
Cameron told parliament that the key question was whether the Egyptian leader had done enough.
“President Mubarak says he is going and we respect that, but what matters is not just the orderly transition but also that it is urgent, it is credible, it starts now,” he said. “And the more they can do with a timetable to convince people that it’s true, the more I think the country can settle down to a stable and more democratic future.”
Cameron also said his government takes a very strong view that political reform is what is required in Egypt, not repression.
“And we’ve made that clear in all the calls I’ve made, including to President Mubarak and yesterday [to] the Egyptian prime minister,” he said.

TSYS: Treasuries are trading higher across the board in London trade
Weds, extending gains from the Asian session, with the curve flattening
as the longer-end of the curve outperforms. Japanese names were again on
the bid in the 10 and 30-yr sector, taking advantage of the overnight
weakness. Flows were good, with strong two-way flows, despite much of
Asia being closed for the Lunar New Year. Prices continues to trade
higher in London, helped by rallying EGBs, with good buying seen in the
7-yr note. The yield on the 2Y was last at 0.60%, with the 5Y at 2.00%,
the 10Y at 3.41% and the Bond at 4.59%. The curve was flatter as the
long-end outperformed, with both 2/10′s and 2/30′s 3 bps flatter at +281
bps and +398 bps respectively. Cross-border trade saw the 10-yr
US/German spread at +25 bps as core EGBs outperform modestly.

LONDON (Dow Jones)–Barclays Corporate has appointed Karl Nolson as head of syndicate to offer a tailored syndicated loan solution to Barclays Corporate client base, the bank said in a written statement Wednesday.
Nolson has more than 20 years experience of working at Barclays where he was one of the founding members of the loan syndicate team.

He will be responsible for facilitating access to the broader Barclays Capital debt and equity platforms to the clients of Barclays Corporate.