Today, at the Intellectual Property Subcommittee Hearing on “Competition and Consolidation in Financial Markets,” House Judiciary Committee Ranking Member John Conyers, Jr. (D-Mich.) and Congresswoman Sheila Jackson-Lee (D-Texas) raised their concerns of the potential economic harm that would result from the proposed mergers of either the New York Stock Exchange (NYSE) with Deutsche Boerse or the NYSE with the National Association of Securities Dealer Automated Quotation (NASDAQ).
We are generally against any mergers of this size. Mergers of this size must prove to the American people the immediate value they bring to job creation and stabilizing the economy. The potential for harm, systemic risks, outweigh any perceived gains in efficiency. Moreover, analysis of the consolidation in the financial exchange markets does not change relative to who the buyer is. We are against NYSE merger with Deutsche Boerse but we are equally against NYSE merging with NASDAQ. At a fundamental level, both mergers would result in fewer jobs and less choices for consumer and public traded companies.
Specific to a merger with Deutsche Boerse, the proposed merger would create massive transnational regulatory issues that the world has yet to create the infrastructure to regulate specifically which entity could effectively oversee and regulation a transnational combined company of this complexity and how much control would the US have over such transnational regulators? No entity exists right now to accomplish that necessary goal.
Merger between NYSE and NASDAQ would be akin to General Motors merging with Chrysler, such a horizontal merger in the United States should not take place, whether in the automobile industry or the financial services industry. Such a merger would result in a loss of jobs in New York and around the country, at a time when NY and the entire US cannot tolerate additional job losses. Moreover, the merger would lead to less choices for consumers in their investment choices and to companies seeking listings.
This is not a “failing industry” so that defense against competition concerns is not useful. This is simply about increasing profit by creating greater leverage for the financial exchanges.
Moreover, the question should be whether the mere existence of dollars to spend by the purchaser is sufficient enough to allow a merger to go forward. The determining factor should be an examination of the value it brings to the American people, and how anti-competitive it would ultimately be.