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I say profound things

Is it time to sell (yet)?

“Buy, buy, buy” is how the Economist headlined its timely briefing on financial exchanges this week:

TRADERS cannot resist a bet, even on their own fate. Amid a bidding war over Chicago’s derivatives exchanges, the US Futures Exchange, also based in the Windy City, has launched a “binary” contract which allows speculators to take a punt on whether the IntercontinentalExchange (ICE) can snatch the Chicago Board of Trade, America’s oldest derivatives exchange, from the grasp of the biggest, the Chicago Mercantile Exchange (CME). Until recently ICE, a fast-growing electronic upstart from Atlanta, had the edge. Then the CME upped its offer to $9.8 billion and its chances of success—as measured by the binary contracts—leapt to over 70%.

(But of course, trading on binaries based on the outcome of a possible merger battle is NOT gambling. And of course it is unlikely anyone is doing it in their BATHROBE…so Rep Frank Wolf needn’t worry…)

I’m going to keep this short and sweet – I wonder if today’s existing (and/or planned) mega-exchanges don’t resemble the giant incumbent telecom companies c. 1998?AT&T Share price history

(…and of course I’m not just talking about the share price…and are Reg NMS and Mifid analogous to the Telecoms Act of 1996?)

History never repeats itself – exactly – but if I’m right, there are fortunes to be made and lost over the next decade in this arena, and – more importantly – I’d suggest they aren’t the ones most people are currently discounting.

  1. […] In this post, Going Private makes the point by looking at a variety of businesses such as entertainment (videos, music), telecommunications and consumer electronics: “…particularly egregious in the case of business models that are effectively based on distribution channels.” (emphasis added) Now I would posit that this describes remarkably well much of the business of modern financial services as well. (Indeed some readers may recall my penchant for comparing the business models and the impact of technological changes thereon of the telecommunications industry and financial services…) (Mixing metaphors liberally…) bolting unreconstructed, 20th century, distribution platforms together ad infinitum, might get you a more efficient horse-and-buggy, but I sincerely doubt it will get you a car. […]

  2. […] About that time I started comparing the share price performance of the exchanges with that of the late 1990 telecom companies, and asked the question here just over a year ago as to where this might be heading… […]

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