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The stock exchanges have grown substantially over the years since their origins. Many mergers and demutualization have transpired among various stock exchanges for a long time as well. Six mergers were examined to see if stock exchanges are motivated by market power or market efficiency. The six mergers were the Nasdaq-OMX merger, the London Stock Exchange and Borsa Italiana merger, the NYSE-Archipelago merger, the Deutsche Boerse-International Securities Exchange Holdings, Inc. merger, the NYSE-Euronext merger, and the Chicago Mercantile Exchanges merger with Chicago Board of Trade (Otchere & Abukari, 2020). These six mergers could induce high competition levels due to their trading heights. This fact makes the merging firms candidates for invoking market power practices.
Due to the wave of demutualization, consolidation in the stock exchange industry has been on the rise. The 2006 Paris-based Euronext and NYSE $10.2 billion merger procedure and the Nasdaq-OMX (Nordic bourse) $4.1 billion deal in 2007 could have reduced competition (Otchere & Abukari, 2020). The exercise of market power and high market concentration due to mergers like these cannot be discredited. Since there is consolidation in the industry it is important to examine with empirical evidence whether or not these mergers cause the exercise of market power exploitation. This is important to examine because industry consolidation raises competition concerns among residents and regulators. The recent research on mergers and the exercise of market power within the six major stock exchanges revealed significant gains in productivities for the merging firms. Sales productivity was found to be positive within the merging exchanges. The expense efficiency was found to be negative. The measures of market concentration and market power were not significantly positive relative to the post-merger period profitability. Those results indicate that market power exploitation was not present (Otchere & Abukari, 2020). These heightened levels of competition make merging for efficiency reasons critical in todays economy and level of technology.
Another research article provides evidence from an investigation on the reaction of integrated markets and the impact of the covid-19 pandemic. A dynamic conditional correlation model on Euronext Stock Exchange was used to examine these affects (Espinosa-Mndez, 2021). The findings indicated that mergers of financial markets could act as a defense against negative surprises such as covid-19. However, this only rings true as long as the market considers the shock as transitory and not more permanent (Espinosa-Mndez, 2021). Stock exchange mergers have their advantages and their disadvantages. When a firm is deciding to make an integration move or not the best way to decide is to take it to God in prayer and seek wise counsel. In Philippians 4:6-7 (English Standard Version, 2022) it says, do not be anxious about anything, but in everything by prayer and supplication with thanksgiving let your requests be made known to God. And the peace of God, which surpasses all understanding, will guard your hearts and your minds in Christ Jesus.
English Standard Version Bible. (2022). ESV Online.