U.S. Stock Market Entering A New Cycle

Best Growth Stock – The one time symbol of U.S. economic prowess, the New York Stock Exchange (NYSE) is on its way to merge with the German company, Deutsche Börse. While this is seen by market analysts as drive to give new life to the exchange, many investors are looking upon this deal as the end of an era. In the recent years, the NYS has been suffering heavy losses in its business. So much so, that it had been compelled to sell its business technologies to the Qatar Exchange to cover its losses. This sell of technologies along with market data sell had been the sole field where its market had grown in recent years. It made up for 13 percent of the company’s net profit in 2010.

Some of the investors are apprehensive that this deal would mean the passing of America’s equity business in the hands of another nation to a great degree. However, this fear is being downplayed by the government. This is the not the only merger of its kind that America has witnessed in recent years. In 2008, two of the biggest future exchanges in the country, the New York Mercantile Exchange and the Chicago Mercantile Exchange (CME) saw a merging of their businesses once the regulators gave the green signal. Similar happenings are predicted to take place in Europe also.

One of the major arguments against this merger is the chance of increase in market instability. This has become all the more contextual as the CME reported last week that the price of its euro-dollar and U.S. treasury bonds are expected to fall by 65 percent, a figure similar to that announced by the NYSE. This gives investors the opportunity to buy more for less money and in consequence will start off uncontrolled buying resulting in unbalanced market conditions.

The former Democratic Senator from Delaware, Ted Kaufman, remarked that the market has reached this situation owing its having to transact with traders who buy and sell off the stocks frequently. This has decreased the margin of the business to a very narrow limit where it has become increasingly difficult for the companies to stay in competition. He feels that the market is going to see many more of such mergers before the SEC can work out a solution to this problem.

On the other hand, the Deutsche Börse stands to gain quite a lot from this deal. In addition to the money generated from selling of NYSE technologies, they are also going to get the lucrative and highly money generating derivative space. With the fee for derivative space increasing by 14 percent in 2010, it comprised a third of the entire profit of NYSE, amounting to $826 million. With the Deutsche Börse owning half of Eurex and NYSE owned Liffe about to be joined to it, their revenue from derivative space are going to be secure from new rivals.

Despite strong resistance, the chances of stopping this merger are pretty low. While regulators can do put a sop to this, not much is expected to happen along that line.