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International stock market mergers are unravelling

People walk past the Euronext headquarters in Paris, in this May 22, 2006 file photo.

JACQUES BRINON/AP

The trend of international consolidation of stock exchanges appears to be not just over, but unravelling.

As part of their planned combination, IntercontinentalExchange (ICE) and NYSE Euronext say they will look to sell their European equity markets, known as Euronext, in an initial public offering.

In the last surge of exchange consolidation, international combinations in equities were the final frontier. First, exchange operators had merged with rivals in their own countries. In Canada, that created TMX Group. In Europe, the result was Euronext.

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The next stage seemed to be more global. NYSE and Euronext combined. NYSE Euronext then tried another deal with Deutsche Boerse of Germany. TMX looked to merge with London Stock Exchange Plc. Singapore's market looked for a tie-up with Australia's.

For various reasons, most of those deals failed. The only big one that really got done was the creation of NYSE Euronext. And Thursday, management of NYSE declared the experiment over after synergies between the companies had been limited, and the value of Euronext, such as it is, lost within NYSE. ICE executives also pointed to a need to cut down on the number of businesses the companies would run, and regulatory changes that they said make it hard to run an international stock exchange business.

On a conference call to discuss NYSE Euronext's planned acquisition by ICE, NYSE chief executive officer Duncan Niederauer conceded the Euronext transaction had been a bust.

"We've yet to deliver those returns and prove that hypotheses," he said.

Jeff Sprecher, the head of ICE, suggested that the value of Euronext would be a lot clearer on its own. In his view, he said Euronext is "massively undervalued."

The view is that Euronext will be more valuable to European investors, and more able to cope with idiosyncratic local rules on European equity trading, on its own.

In recent years, "derivatives markets have become more global but to a large degree many cash and equity markets have become more regional," said ICE chief financial officer Scott Hill.

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