NASDAQ Purchase Shows a Global Shift

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NASDAQ, the stock exchange known for its coverage of technology stocks, has surprised observers by purchasing a 15 percent stake in the venerable London Stock Exchange. Now some expect NASDAQ to attempt to gain a majority stake soon — and for more stock exchanges to consolidate globally.


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The London Stock Exchange's history goes back to the late 17th century. It's still the center of Britain's financial industry, so it's come as a shock to some that New York's youngest stock exchange, NASDAQ, is courting its venerable British rival. Yesterday NASDAQ bought a 15 percent stake in the London Exchange, and many expect NASDAQ to make a play for a majority stake soon. NPR's Adam Davidson reports that all this is evidence of big changes sweeping global stock exchanges.

ADAM DAVIDSON reporting:

When you hear the words stock exchange you probably immediately picture some big, busy room where dealers trade with each other. But that doesn't happen at NASDAQ or at the company it's trying to buy, the London Stock Exchange. They're both electronic exchanges and they sound very different.

Mr. FORREST BOWMAN (Stock Trader): And just a few seconds, and yes, I'm there now. So I'm in front of my order entry and trading screen.

DAVIDSON: Forrest Bowman trades on the London Stock Exchange. His company,, created software that helps investors trade stocks from anywhere in the world. They just need a computer and an Internet connection. Electronic trading has been around a while, but the technology is advancing so quickly that's it is changing the way the exchange business works.

Mr. BEN STEIL (Council on Foreign Relations): In the exchange business the bigger the better.

DAVIDSON: Ben Steil with the Council on Foreign Relations says that's exactly why NASDAQ is hoping to buy the London Stock Exchange. They're hoping to profit from the high volume that electronic trading allows. The business logic is solid, Ben Steil says, except for one problem. The U.S. regulator, the Securities and Exchange Commission, might decide that it has jurisdiction over the London Stock Exchange as soon as an American Company buys it.

Ms. ANGELA KNIGHT (British Stockholder's Trade Association): I suppose that's where my concern starts. Because the U.K. has its own rules and requirements, and they're different to the U.S. They're not wrong, but they're just different to the U.S.

DAVIDSON: Angela Knight runs APCIMS, a British stockbrokers trade association. She says America's SEC regulations are seen as particularly costly and intrusive, and she says many British traders are desperate to keep NASDAQ away from the London Stock Exchange. They're afraid NASDAQ might have to use U.S. rules even in London, and that could kill London's exchange business.

Ms. KNIGHT: That business will walk away. It's ever so easy to start to lose business. It's very hard to get it.

DAVIDSON: It might surprise some people that the U.S. has more stock trading regulation than most European countries. Knight is afraid costly U.S. regulation will send companies to Germany or France to sell their stock. That would hurt the U.S. and Great Britain, she says. NASDAQ officials declined to comment, but some experts have said the company could structure a deal that would not force U.S. regulations on the London Exchange. No matter what happens with this particular deal, most industry watchers say that deals like this are inevitable. Soon there will likely be a handful of large global exchanges handling most stocks.

Adam Davidson, NPR News.

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