A Different Form Of Stock Exchange Investment

It is worth remembering that there is more that one way to make a stock exchange investment.

The majority of this site discusses ways of purchasing shares or stocks in companies with a public listing. It is of course, also possible to invest in the company that owns the exchange itself.

This has become a big game as the more aggressive companies, such as Nasdaq, look to purchase other bourses around the world to expand their empires. Though these purchases are fraught with problems, it has not stopped rivals from buying large stakes in each other to either offer the potential for a hostile or friendly purchase in the future and potentially to block other competitors from the same expansion.

This is a topic that opens up many issues relating to finance.

If a company, such as NASDAQ, is trying to make a cross border stock exchange investment, there are huge national economic and regulatory issues at stake.

For example, we have said many times on this site, that a bourse is a vital part of a national economy. It really is! We were not joking. There can potentially be major financial consequences for a national economy when it's stock exchange is bought by a foreign corporation.

What about regulations? Do the regulations of one country suddenly apply to corporations listed in another country which just happens to be owned by another? The potential for having US anti money laundering rules, or Sarbanes-Oxley regulations would be quite unappealing for many companies if a US firm were to purchase other exchanges.

The cost of compliance with regulations in a home country and then a second set of regulations from another nation would be damaging to many smaller listed firms.

As you can see, this would be an unpopular and potentially very expensive part of any international stock exchange investment.

Strategic Investments

As has been noted elsewhere in this section, there are some very major power players operating in the world. In a world of geo-strategic influence, a stock exchange is an important symbol of capitalism and power and crucially, a profitable business.

National governments use the vast resources of their sovereign wealth funds to make strategic investments around the world. This offers greater leverage when their interests may be discussed next by a foreign and more powerful government. Understandably, major markets - just like an oil field or government debt - is an important such asset.

Additionally, the major bourses around the world are trying to capture an ever larger share of their own industry. While these takeovers may not be authorised, or even possible, it means that there are many large stakes of ownership held between the different companies. Blocks as large as thirty percent are held, not always because the rival bourse wishes to own another, but simply to ensure they can stop others from purchasing. Such blocking minorities can wield significant influence.

This all means that the Directors and shareholders of the major bourses of the world are playing their own version of "The Great Game" with very high stakes.

To read more, please follow these links:

What Is A Stock Exchange And What Does It Do?

What Is An Efficient Capital Market?

Stock Exchanges And National Economies

Investment Institutions On The Stock Exchange

Executing A Trade On The Stock Exchange

Why Are There So Many Stock Exchange Scandals?

Stock Exchange Regulations - The Sarbanes Oxley Act

Learn About The Important Role Of Stock Rating Agencies

How Big Should Stock Market Bonuses Be?