GLG News by Patrick Young

Implications: Man Group is suffering a lack of investor confidence that may not be unrelated to the aftermath of the somewhat disastrous first listed year of its MF Global subsidiary.

Analysis: Man Group is a good business at its core but the problem right now is we thought the same of MF Global last year and that company has had a disastrous first year on the stock market. Basic risk controls at MF Global were found significantly wanting. Statements at the trials of former Refco executives brought worrying implications for the brokerage and all manner of disasters befell it which suggested that MF Global seemed to be dangerously close to losing track of reality.

In the midst of a massive outflow of money from those clearing companies who did not have rock solid balance sheets, MF Global stock has slumped and ultimately Kevin Davis was replaced as CEO.

Of course this can't be the same at Man Group, can it? The company has sound management, a great track record and an incredible history of returns through its core AHL machinery and related hedge fund management entities.

Unfortunately, this market is in the midst of a phase where nobody wants to believe anything that is not absolutely conrete. There is an acute reticence to take the slightest thing on trust after all manner of "safe and secure" utterances have ultimately been proven inaccurate with other major financial entities this year.

Man Group's management have an uphill struggle to make the market believe their case and the MF Global stock melt-down is doubtless an added problem for the parent group's reputation as a brilliant hedge fund manager of the utmost probity.

In this, the most critical and nervous market for generations, a perfect reputation of the whiter than white variety is required and Man Group will find itself struggling to ensure its business is back on track in a world where hedge funds have, at least temporarily, lost their lustre for some clients. Any shock news will be punished and in that respect Man Group will be working hard to make up for lost ground.

Implications: Bank of Ireland is in a mess and has been working hard to counteract a huge property bubble

Analysis: In perhaps the least surprising banking announcement of the week, the news of Bank of Ireland scrapping its dividend seems like a sensible defensive move given the fact that residential property in its native Irish Republic as well as Northern Ireland is currently akin to a blood bath.

Implications: CDS trading is a very useful tool for risk transfer. However, the fundamental precept of building houses on weak foundations or muddy ground remains an issue. There is a future for the marketplace without needing to resort to bans or major restrictions. A sound (and ideally open) CCP regime is a pre-requisite for the future of the marketplace.

Analysis: Doubtless there will be flat earth debunkers out there but the CDS market has a future and does provide a very valid piece of risk transfer. It is only a pity that the marketplace has been based on the fundamentally unsound foundation of bilateralism which always left the market subject to a huge potential disaster.

There is no point crying over spilt milk or pointing out "I told you so!" a decade or more back...although it is very tempting.

As the market devlopped it was always obvious that banks would endeavour to keep as much of the profit to themselves without seeking to commoditize the marketplace as it would be against their own short-term best interests.

At the same time, it would be daft to point all the blame at CDS contracts as the key failing in what has been the rapid deflation of a property bubble / mortgage fiasco. Regardless of how one views the various political activities, there is also the highly questionable political inactivity of serial US regimes to reorganise Fannie and Freddie.

The Economist has the correct tone. Portfolio hedging was rather absurdly vilified by those who didn't understand the crash of 1987 and this time around scapegoating CDS will only stifle future financial innovation.

The one issue for the future is just how open the CDS ccp will be. Banks seem keen to maintain an "adults only" environment restricted to certain counterparties as opposed to a more democratic fully transparent platform open to anybody with the capacity to post margin. Then again the whole process of creating this CCP requires an entirely separate article or three...

True the aftermath of the CDS fall-out has parallels with the South Sea bubble where in the wake of the stock market crash, the government outlawed the purchase of life insurance policies by third parties...but nowadays politicians are much more enlightened, aren't they?

Hmmm.

Implications: LSE has significant issues in dealing with competition Lack of a significant derivatives platform leaves the exchange with a relative lack of options.

Analysis: This article says it all. The LSE made a canny takeover of Borsa Italiana which finally gave it some derivatives critical mass (and has helped buoy profits) but the LSE remains a platform too reliant on the (UK) equity marketplace.

Nevertheless, obituaries have been written before and doubtless the LSE will...or rather: an LSE will invariably survive...it may just not be the current incarnation. It is impossible to see London, the world's most cosmopolitan major financial centre, being without a stock marketplace.

That said, LSE needs to find a way to scythe its cost base apart and given her previous successes in managing some basket case businesses, it is somewhat surprising Clara Furse has not made greater progress. Nevertheless, the future of LSE means it needs strong management and a very dynamic plan to move forward. SImilarly, the LSE exemplifies the perils of the legacy exchange which has a huge cost base against the modern siege warfare exponents in the MTFs.

Then again if the MTFs really destroyed the LSE, what then? Who is going to provide the listing and regualtory functions that the legacy exchanges must provide? The irony is that while they want to feast on its order flow, the MTFs themselves are still reliant upon LSE, and I don't just mean their umbilical cord due to the lack of a unified "tape" for printing market data!

As an exchange, the LSE looks more at odds with the modern marketplace landscape than it has for many years. Nevertheless, incumbent survival rates have up to now always managed to defy the predictions. The LSE has a number of options and various cards to play. It is far too early to write it off despite a very bruising first round against the new MiFiD inspired competition.

Implications: The idea of regulation for ratings agencies can appear a seductive panacea but it is riddled with dangerous implications...

Analysis: When politicians seek scapegoats, their self-belief that they can do better is invariably married with a clear desire to ensure they avoid future criticism by developing a rock steady regulatory system.

However, how can a government effectively agree to leverage itself to be open to future lawsuits from all sides by giving some form or explicit or even tacit guarantee of the efficiency of ratings agencies?

The knee-jerk concept of regulating is always a dangerous one.

In the case of regulating ratings agencies, the notion has the potential to be downright lethal.

Patrick Young

Implications: MF Global is one of the key players in the global exchange traded derivatives (ETD) brokerage industry with the power to make and potentially, to break, markets, leading to some fascinating -and very significant- political dynamics within the industry. MF Global has been stung by recent activity on the rumour mill  as well as its own frank admission of a risk system failure that cost it dearly. MF Global has a massive opportunity but knows it must work hard to ensure its reputation is whiter than white - particularly as some of its acquisitions have included key elements of the tarnished Refco name etc.

Analysis: It may be an uncomfortable fact to swallow but in the wider world, the futures and options business and indeed all derivatives generally retain something of an image problem.

Perhaps the cowboy image has gradually gone but alas, a certain "redneck" feel seems to remain - at least partially driven by a media that has predominantly tended to place derivatives trading in the "too hard" (and threfore to be avoided) box.

This is not helped by the fact that highly leveraged entities who come unstuck tend to blame the derivatives for their problems rather than the leverage instead. The CDS debacle has (putting it mildly) not been helpful either.

Ultimately the arguments for and against sound a bit like the risk to citizens from gun control or deregulated speed limits and fall outside the scope of this analysis.

Nevertheless, this is, as I never tire of saying, "a derivatives world." The simple fact is that the growth in financial product is heavily skewed in favour of these off balance sheet products and the actual growth numbers are simply astounding year on year compared to cash products.

MF Global in fact has more customer accounts in ETD than were believed to exist according to informed industry estimates only a decade ago! MF Global is a 500 lb gorilla but it is a long way from being dominant in the sector - thanks to continuing ease of access for reasonably capitalized players to the marketplace.

However, when it comes to capital here is the rub. Traditionally most large bank groups have eventually run into difficulties producing the required return on capital in the futures/options broking business and it has been independents who have tended to succeed.

A handful of major bank brokerages survive but often they cannibalize their ETD revenue as a loss leader for more sophisticated (and much more lucrative) OTC products.

Powered by the Man hedge fund business (well to be specific the former AHL managed fund business in many respects), MF Global is a synthesis of assets from Man itself and also a series of acquisitions e.g. the Tullett & Tokyo ETD business, as well as critical components of Refco when it imploded (not long after the Cargill Investor Services acquisition).

However, owning something that used to be "Refco" has its problems as the futures/options business anyway is seen (most unfairly) in many quarters as a less reputable business than the securities markets.

In this respect, a key issue for the likes of MF Global or Interactive Brokers is to manage to broker a suite of products (increasingly cash markets as well as niche OTC such as CFDs and margned forex too) while maintaining customer confidence to clear through them.

MF Global is a well capitalized and secure brokerage. The dynamics of clearing mean it is rather difficult to lose a lot of money - sufficient to endanger the company, say, in a world of almost consistent continuous trading.

However, confidence n this marketplace is everything and if a name with a huge reputation for probity and safety such as UBS can find their image tarnished then it is difficult for MF Global simply because they are a relatively unknown name to the public in a business they do not or do not want to understand. After all, this is a company whose parent organisation still found itself being benchmarked against a chart of the German MAN truck manufacturer on CNBC until relatively recently. The public likes its finance from big trustworthy institutions and - for better or worse, richer or poorer, the general populus equate financial probity with big name, heavily branded, banks.

True, UBS has lost money as a result admittedly of proprietary trading which MF Global eschews...but in a panic, does such ahem, "minutiae" really matter to the terrified investor? Equally, do investors really make a big differentiation between what are basically relatively low risk data processing combines like MF Global and the banking leviathans who broke/trade/structure and just try to have their fingers in any pie they can find?

My general impression is a resounding no!).

So, MF Global could benefit from some more capital even if only to shore up confidence. Moreover, MF Global can doubtless find some vehicles to acquire or areas to develop further if it has a surfeit thereof. So MF Global is considering raising some capital just to make absolutely 100% sure that the marketplace understands that it is a profoundly solvent and remarkably safe pair of hands to entrust your clearing account to. In fact it is a good way to create encouraging media stories so as to try to propagate greater understanding of the company and its business model. This is vital in a world where say those cash equities brokers who are dependent on IPO and listing revenue are likely to soon report some quite traumatic results unless there is a sudden explosion of (partcularly more modest) issuances e.g. on LSE AIM etc).

That said, we know ICAP is exploring an exchange business and indeed MF Global alrady have their significant interest in the USFE...

MF Global is a leading if not number one player on virtually every market they access. Perhaps the capital may not be just to enhance their balance sheet beyond any question. Additionally, more funding could help MF Global disintermediate the major exchanges and clearing houses with whom there is considerable friction over fees.

Patrick L Young

Implications: Amazon is attempting to own the book business by exercising control of the small fast growing independent end of the market. Ultimately having done much good for book buyers and helped publishers, Amazon is now in danger of squeezing the small houses they have helped encourage. Book publishing is in danger of having a very significant element of control levied by Amazon which will profit Messrs Bezos and Company in the short term but not in any way assist the development or innovation in the publishing business. In the long term Amazon will see their catalogue shrink. Their market share will decline and they will stifle the growth of the book publishing business. Make no mistake, this is a very very bad day for technological innovators, small businesses and publishing as an industry. For Amazon, it is a foolish plodding play of a monopolist which plainly has lost sight of the fact that treating suppliers with disdain will create a backlash. Finally expect higher book prices too!

Analysis: For the record (and so readers can understand why an expert in financial market structures and complex products is posting on this story, my expertise here goes back a decade or more...) Amongst my various corporate interests, I own a small book publishing imprint. I set the company up to use the "new" Print on Demand (POD) technology.

POD is a great way to publish books and avoid being stuck with the stodgy, highly inefficient old fashioned legacy publishing houses which stifle competition and profit while authors get squeezed.

With my current POD model I can pay authors a higher royalty than the general publishing market and also make a healthy margin. In fact the entire finances of publishing books can be rewritten.

Now, in what strikes me as a desperate measure to improve their own margins at the onset of a recession, Amazon wish to cut my provider (for the record: Lightning Source) out. Small houses such as my own would be forced under this proposal to use a monopoly supplier owned by Amazon. Moreover, the terms I have seen are significantly worse for my business - higher fees and worse margins. Let's not trifle with all that relationship bulding cost etc (and believe me Lightning Source do a terrific job, I do not under any circumstances want to change from using them currently).

It is a fact of life that large companies can become arrogant and develop monopolistic tendencies.

Alas, in this instance, Amazon are effectively creating a programme to help the large leviathans of publishing (with all their inefficiencies) and squeeze out of business the innovative new companies that have created the POD culture the world over.

This as a concept makes as much sense as getting pregnant and then feeding your children as infants to the elderly and infirm.

Amazon have done many great things for book retailing and that must be applauded. However, this policy develops clear evidence that they are succumbing to short term thinking to create a monopolistic profit (and subsidise a subsidiary) which will ultimately be detrimental to the entire book publishing industry, hurting consumer choice in the process.

I suppose there are free speech implications here too but I am focusing on the business issues here, although I suppose in the litigious USA there may be legal challenges?

Amazon needs to keep growing the book industry. By demanding cuts n margin and forcing higher costs and bureaucratic duplication on small publishers, they are only going to stall growth in the industry.

Or maybe, just maybe, they may start unpicking their business model and lead to alternative sales channels becoming more competitive.

Confidence in Amazon has been shaken by this announcement and even if they succeed, the trust of the publishing industry in Amazon will take a considerable time to rebuild, at best.

Barnes & Noble may not see tis as a major "gift horse" but having built their business model on the comprehensive nature of their offering, Amazon is now explicitly encouraging smaller publishers to concentrate on other channels. That is a very arrogant position to be in given the fluidity of customer loyalty that is possible in the modern internet market.

At the onset of an economic slowdown, it may even be a first sign of suicidal tendencies.

Patrick L Young

Implications: Ultimately all markets go in cycles. The concept that property, to name but one sector, would forever go up, was a delusion of the Florida land grab of the 1920s and umpteen other times in history, not just the very recent past... Sadly in the modern age, the analysis remains that even with new-fangled tools to lose money by, the old fashioned methods of over-leverage and foolishly bullish beliefs are working just fine too.

Analysis: Modern investment means we have new tools all the time. Just as guns kill people, it is always a surprise to the uninitiated (or the media) to find out that using tools which make money faster on the way up turn into very unpleasant money loss engines on the way down too!

Right now the US, the UK and various other nations have a big hangover in the wake of an amazing party.

At the end of the day we can blame CDOs and so forth and they are indeed a key part of the whole fiasco. However, the simple fact remains that nations have over-geared their orientation to property and are now paying a very very severe price as the property cycle turns. On a macro scale some nations have overgeared themselves and that will turn into a bloody witchhunt amongst those who are culpable in due course.

There are of course pockets of property gain - and I certainly hope my positions in various facets of Eastern Europe will ride out the storm better than many western markets but then again who knows...

On the other hand we cannot expect such emerging markets to hold up the US economy as purchasing power is so different. However, there are possibilities of markets which will grow - perhaps in fits and starts - amongst the emerging world, just as there are those with budget deficits who are going to have an ugly summer once economic reality hits.

Central banks are once again acting as lender of last resort in a big fashion and confidence is required across the board. No doubt about it, as this "Motley Fool" article suggests, here are some amazing companies out there to invest in. The problem remains, just when is going to be the right time?

Given the crisis we have seen so far, the actual major indices are not _that_ far away from their highs and that is either a wonderful sign of robustness or a very worrying harbinger that maybe, just maybe we are edging closer to a situation akin to 1929 once again.

I am not saying we are, but just as being long property has turned for many into a one way street of misery when the market turned, I am not confident enough to say that there is no chance of a recurrence of savage past equity market falls in the latter part of this year.

The concept of "A Nation of Enrons" is a major concern,. Not just because it suggests a lot of hiddne debt that is junk but also because it suggests a lot of digging must take place and a great deal of soul-searching before confidence will return. That is a big big worry in this marketplace.

Patrick L Young

Implications: CME has run its slide rule across cash exchanges before but never taken the plunge to acquire one. Equally, it seeks to create partnerships where it can act as a predator and buy out the partner (see my previous analysis on the subject). Sooner or later CME will likely acquire beyond its traditional futures sectors and there is a wealth of deals out there... However, the key thing CME (and other predatory exchanges) need to do in the long term is to diversify beyond US dollar denominated markets.

Analysis: Acquirng NYMEX gives CME a great expansion in various commodity markets (partiularly metals and oil products such as the benchmark WTI futures) as well as these interesting share positions.

IMAREX is pretty modest as a business but freight trading has enjoyed enormous growth in the past couple of years.

MX and with it the merged MX-TSX entity is a handy
foothold into Canada and indeed an equity marketplace too.

The BM&F stake is one example of where CME (and all exchanges with predatory ambitions) must do deals: zones beyond the realm of the hitherto almighty US dollar. In the long term the greenback is not going to be so dominant and therefore the currencies of the likes of the BRIC economies may become much more substantially traded. CME needs exposure beyond the US dollar zone...

The deterioration in relations between the CME and industry body the FIA has been growing for some time. Given that FIA serves a very narrow remit (essentially futures brokers alone - it is not nicknamed "The Futures Intermediary Association" for nothing!). The FIA's annual conference is coming up soon n Boca Raton, Florida and CME are breaking new ground apparently by largely avoiding attending the event. That said, more exchanges may follow suit if the FIA continues with what has been some rather bellicose and narrow interest statements of views...

Meanwhile, CME has lots of opportunities but then again like all exchanges it will face mounting competition on all sides in the coming months and years...

Implications: The ability of the new merged management team to keep clients happy when products are merged is going to be a key issue in making this merger work. Staff are understandably nervous about their prospects and the history of Reuters in recent years has included a great deal of almost ongoing upheaval.

Analysis: Merging financial data vendors is difficult if only because one product must win out and yet the reasoning may not always be clear cut. In a period when financial markets are unstable and banks will be keen to extract cost savings, Reuters-Thomson is going to have a very difficult job keeping clients loyal to many products happy.

Difficult definitely - impossible, of course not. However a great deal of diplomacy is required and the upside to this business is enormous.

Reuters Thomson needs to demonstrate an agility rarely seen in either structure in recent times and that will prove a huge challenge.
Having said that, in a financial marketplace which while currently recessionary will ultimately grow again, the merged entity has huge opportunities. Indeed, in many respects the sum of the pair is a combination of businesses who often due to the speed of market change may have been missing as many opportunities as they could exploit.

There is a lot of hard work ahead but then again there is simply enormous upside if the execution of a clear strategic vision is carried out.


Patrick L Young

Implications: Another exchange, another strong processing result...Just imagine what would hapen if they could close the bottleneck of the floor!

Analysis: NYMEX continues to impress but then again with Clearport amongst its offerings this is hardly surprising and let's face it if you can't make a lot of money in commodities in a period when oil and gold were centre stage, then when can you expect to profit?

Nevertheless, NYMEX has a good business overall. The big question is hypothetical - just how fast would it grow if the exchange was purely electronic?

That answer judging by similar experiences from other exchanges when they closed their floor trading, is "considerable."

To put it mildly...

Patrick L Young

Implications: The political battle between the big banks and exchanges is becoming more explosive than ever.

Analysis: The fault lines in the battle for dominance in the financial intermediation business is getting a lot more fraught.

Exchanges see themselves as the rightful arbiters of trade execution while end user investment banks see themselves as the rightful source of the order flow.

As ever the truth is somewhere in between and the investment banks may yet be surprised by a slow growing understanding amongst end user investors that they are in fact the source of a great deal of the order flow the bulge bracket investment banks view as their own.

Meanwhile, in a world where exchanges are consistently reducing fees,  the investment banks want cuts to be faster and deeper.

At the same time, the fact that the total amounts of money being paid by entire investment banks to each exchange per annum amount to the bonus on one medium sized investment bank trading desk seems to be overlooked by those who can only see "large" numbers wth several noughts on the end.

A sense of perspective suggests this is all about political domination and indeed the right of investment banks to intermediate as part of their survival in a world of microtrades and whisper it quietly, microbanks...

Meanwhile, this latest plan will have the same hurdles as all the other such plans (market structure history buffs will recall Brokertec, nowadays all the talk is coloured by Turquoise). Meanwhile, interested parties to such organised cartel-esque structure such as banks tend only to act with solidarity for so long before they seek competitive advantage...itself a story related to the history of much product development for instance.  Moreover, management volunteers are often thin on the ground when it comes to working for a company whose revenue is only a few pence per trade compared to the much better margins to be had in investment banking proper.

More plans will emerge and more exchanges will perhaps even see the light of day (perhaps even Turquoise will yet launch) but ironically the richest pickings for all interested parties is in new products and not merely rebadging a trade in an even cheaper package than its curent tiny cost base. Of course banks dislike that assertion but given their ability to add considerable mark-up to their own value-added products using simple exchange building bricks, there is a certain interesting angle to how virulently they object to paying pennies to exchanges...

Patrick L Young
The Danube Project

Implications: CME deal value is related not just to exchange growth but also the state of commodity prices. Nevertheless, CME is best placed to acquire CME for approximately 40 key reasons

Analysis: CME has made a fairly aggressive move in attempting to acquire NYMEX and indeed Jeff Carter is absolutely correct: CME had a window to compete a couple of years back.

The cost given the current high oil price may be an issue. If commodity prices prove less frothy in the future, volume will likely tail off a bit too.

NYMEX has made great strides in many parts of its business but the core floor remains and it remains a liability. Sooner or later CME needs to really rationalise its existing floor businesses (let alone a new one) - at which stage it will become an even more incredible payment processor than it is today.

There are 40 simple reasons why CME is ideally poised to buy NYMEX now and that is the 40 remaining months for the current NYMEX electronic trading contract using CME GLOBEX. Buying CBOT when the clearing agreement was close to expiry allowed ICE to enter the bidding war. This time it's tricky for a competitor to enter the market.

Moreover, acquiring NYMEX means CME owns the other main global US-based clearing network for derivatives. NYMEX Clearport added to the CME's own clearing offerings is a great global concept for all manner of products.

However, the challenges going forward will hinge on not just the extant floor and commodity prices but also just how much ongoing leverage the US marketplace has in defining commodity prices.

The commodity marketplace is expanding in sync with growing markets world-wide and NYMEX has made many attempts to create new ventures in the rest of the world. This has interesting implications for the company if the merger can be effected. However, there is also always the possibility that maybe, just maybe, more and more er, "liquidity" in 5 or perhaps 10 years time in oil and gas for instance may be made in contracts closer to just where the oil is being produced, or used... NYMEX needs to make sure it can succeed with its strategy to create benchmark beyond light sweet crude oil for instance.

CME/NYMEX is a very interesting deal with great potential...of course that won't preclude a lot of third party debate about the price being paid!

Patrick Young

Implications: The Jury Is Out - But At Least We May Get a Verdict of Sorts Next Year. Historically Major Regulatory Changes Result in Unforeseen Consequences.

Analysis: The jaw jaw bit of the pre-MiFiD era is thankfully over and the many consultants who crawled out from under the rocks they occupied after their humiliation at predicting the Y2K bug that wasn't will hopefully go find another "crisis issue" to deal with in another sector. Now the exciting phase of analysis begins and it will be an intriguing battle.

The plain truth is we can't tell right now where MiFiD will take us but we can make a few educated guesses while awaiting some actual data - but don't expect anything very meaningful until Q2 2008.

Traditionally major regulatory changes result in some unforeseen consequences arising. The smart money ought to search for "the bumps in the carpet" as that is likely to be where the biggest opportunities lie in the long term.

That said, MiFiD is an interesting law and David Wright at the EU has made a passionate pitch to engender cross-border competition and the best price for the client.

Initially, the focus is on the left field platforms making inroads against the  legacy exchange players and this seems plausible. Certainly competition will be intense and nerves will be somewhat frayed at a great many exchanges - which is frankly no bad thing.

So, for now, the key is to let battle commence but not to draw too many conclusions in the short term. Ultimately there will be big impacts from MiFiD but the current conclusions of the market players may well be a tad simplistic. This is three dimensional legislation and as such will have a greater ramification than simply concentrating more business in London. In fact, if anything MiFiD may favour fragmentation for at least a few years.

Patrick L Young
The Danube Project

Implications: Western Union is slow, disorganised, bureaucratic and expensive. New technology competitors are massing and will take market share unless the provider gets its act together.

Analysis: Due to a family emergency yesterday I actually used Western Union. The web site couldn't cope with me in any way shape or form, so I ended up hunting physical locations. No joy with the nearest address in NYC, and I got a very helpful chap and transferred cash (yes only cash!) amidst the lowlife somewhere in Boston last night.

Observations: the service is disorganised, and very expensive. Online presence is dreadfully lacking.

I have seen various new providers seeking to enter the market and given the global quantity of money being repatriated (qv outside the US look at transfers from the UK just to emerging EU nations alone from migrant workers in GB), ther can be no question that Western Union and other legacy providers are hugely exposed to being decimated if it does not get its act together.

Thenm again one only needs to look at interbank transfers in Europe and overseas from Europe to see another appallingly disorganised and expensive transfer mechanism...

Patrick L Young
Capital Market Revolutionary
Monaco (currently in Boston)

Implications: Other bidders Unlikely but the deal may get more complex...

Analysis: A third bidder for OMX is unlikely, It is too much of a hybrid to really attract anybody - hence the curiosity of NASDAQ's bid which seems to have lacked emphasis on the IT side (the bit where a lot of profit upside could potentially lie given current return on capital). Dubai ont he other hand wants OMX for its technology arm where they sense a better return being feasible and indeed a great "diplomatic arm" in IT development to help promote the Dubai Financial Centre project.

Here's a theory: The end result of the NASDAQ deal may be a share swap between NASDAQ and Dubai. Dubai want OMX most for its IT but if they had a chance to have a run at the London Stock Exchange don't be surprised if the men in the Emirate try to exchange their OMX share stake as part of a deal to get the NASDAQ LSE shareholding.

That said, there is yet a possibility Dubai might be able to negotiate a break-up of OMX too, taking the LSE stake and the IT side while NASDAQ gets the European trading content/platform...

True, Singapore are keen on that LSE stake as well but NASDAQ ultimately need to conclude a deal having seen LSE slip away twice and with an inability to match Dubai in terms of reserves when it comes to a straight bidding war for OMX.

See also:
http://online.wsj.com/article/SB118781693465205673.html

Patrick L Young
Author Capital Market Rvolution! / The Exchange Manifesto etc.

Implications: Deutsche Borse feel under pressure to make an acquisition

They are looking for a transformational business - particularly something that gives them a key footprint in the USA

This is a distinctly attractive transformational purchase for Deutsche Borse and gives ISE a huge opportunity to bring US trading to Europe

The aim is to create an across the board competitor to NYSE Euronext

Analysis: Having heard stories of the deal for some time (equally DB have spoken to every exchange in the USA about some sort of tie-up), certainly this deal makes sense for DB by giving it a key US asset, a brilliant technocratic and lean US business , and licences to trade in the major products and create a Trans Atlantic competitor to  NYSE Euronext, as well as putting pressure on NASDAQ to do a deal in Europe  and the derivatives business.

Implications: CBOT future has key implications for CME
All futures exchanges have board issues

Analysis: Jeff Carter provides an excellent overview.

I would simply add that:

1) CME - like many other exchanges which have made the move from mutual status to demutualised public company, has legacy issues surrounding some of its directors - this is commonplace amongst many such exchanges.

2) The big worry for CME right now muct be the future of the CME deal. Note that the counter-bid from ICE would mean CME losing the clearing fees they currently garner from CBOT and that would create a hole in the cashflow of the "Merc."

ICE has already made it clear that with its acquisition of NYBOT it is keen to remove its clearing business from LCH.Clearnet in Europe to its own clearing house and will do so too if it wins the CBOT.

Patrick L Young
ODL Monaco
author "New Capital Market Revolution"
"The Exchange Manifesto"
etc.