But Will the Regulators Approve?

Earlier this week, someone somewhere turned the calendar back to the heady days of 2006 when the first wave of exchange mergers swept the financial world. This week the London Stock Exchange Group announced plans to acquire Canadian exchange operator TMX Group, Deutsche Börse acknowledged that it is looking to buy NYSE Euronext, and Bats Global Markets let it be known that it is still talking to Chi-X Europe about a possible tie-up.

Conspicuous in their lack of merger partners are Nasdaq OMX and Spain's Bolsas y Mercados Españoles (BME). Maybe Nasdaq OMX CEO Robert Greifeld should speak with BME chairman and CEO Antonio Zoido Martínez, since a potential merger would give Nasdaq OMX a strong foothold in the Iberian and Latin American markets.

This flurry of activity could come to naught, however, since each deal must clear the regulators—and the current environment of 2011 is not that of 2006. Creating critical parts of the global financial infrastructure that would essentially become "too big to fail" does not top any regulators’ to-do list.

Compartmentalizing market infrastructures such as exchanges and clearinghouses to prevent larger potential meltdowns seems the philosophy of the day, and who can blame the regulators? Just a few short weeks ago, the European Commission shut down the spot carbon-emissions trading market because of cyber attacks on numerous national trade repositories. Then Nasdaq OMX announced that hackers managed to penetrate its Directors Desk corporate communications web portal. Although none of its trading infrastructure was compromised, it can give regulators pause as they decide if it is wise to put more eggs into one basket.