After 219 years as the citadel of American capitalism, the New York Stock Exchange was near an agreement to be acquired by Deutsche Börse AG in a deal that would create the world’s largest financial exchange.

If a deal is reached and regulators approve, the combined company would trade more stocks and futures than any rival in the world and more options than any U.S. exchange. The takeover would culminate a decade of tie-ups by exchanges around the world eager to find new sources of growth and catch up with smaller rivals that have been quicker to embrace new and lucrative kinds of trading.

For New York, the move is symbolic of the city’s fading dominance on the world stage as other countries are drawing investors directly to their markets. The move also is a recognition that securities trading today goes on at all hours and in all time zones, making the actual bricks and mortar of Wall Street far less important than before.

A deal would extend NYSE’s lead as the largest share-trading venue in the world, adding the Frankfurt Stock Exchange to the New York Stock Exchange and the four European exchanges owned by NYSE.

The new entity would supplant CME Group as the world’s largest futures exchange and create the biggest U.S. options group, as measured by contract volume. NYSE Euronext’s two options platforms, combined with Deutsche Börse’s International Securities Exchange market, amounted to about 40.5% of the U.S. options market last month.

Global stock listing and U.S. stock trading would be based in New York, people familiar with the situation said. The global derivatives business would be led from Frankfurt, and Paris would host the technology arm and European stock trading.

The merger marks the NYSE’s second European deal in just five years. In 2006, the NYSE beat out Deutsche Börse to buy Paris-based Euronext, which boasts exchanges in Amsterdam, Paris and elsewhere.

In 2008 and again in 2009, following their bidding war for Euronext, the German exchange and NYSE discussed a possible merger. But talks foundered because of internal management disputes at Deutsche Börse and disagreements about where a merged company would be based.

The two sides had been planning to announce a deal next week, but put out a statement Wednesday disclosing the talks after word leaked out on a German online financial site, said people familiar with the matter. The companies are in advanced talks, though no terms have been set. Directors will need to sign off on the deal—and a host of regulatory challenges awaits on both sides of the Atlantic.

READ FULL ARTICLE : WSJ

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