As many investors found out Tuesday morning, NYSE Euronext Inc purchased a 25% stake in Qatar’s Doha stock market. This purchase represents the largest investment the company has made in a foreign stock/commodities exchange. The company, as it has done before via agreements with, and purchases of other global exchanges, is looking to play a major role in helping to grow (and profit from) global equity markets (this time in particular it is the Middle East). The Doha Securities Market (which is owned by the state of Qatar) has 43 listed companies, and its market cap has grown to $136 billion from $5.2 billion since 2000. It plans to have an IPO within the next three years.
The following trends have been reinforced yet again:
– Emerging markets continue to play an increasingly large role in the global equities market.
– Consolidation continues even further. We’ve already seen countless large scale mergers, acquisitions, & joint ventures:
(CME-CBOT, NYSE-AMEX-Euronext, TSX-MX, Nasdaq-OMX, etc)
– Partial stakes in exchanges of emerging & foreign markets are increasing.
(India, HongKong, Shanghai, Japan, South America, etc.)
– The IPOs of the exchanges themselves are increasing. Many of the exchanges are already planning initial public offerings within next 2-3 years.
– As foreign equity markets grow, the exchanges that operate in those markets will profit. Hence, all the consolidation & acquisitions that has taken place over the last few years.
– As many businessmen & investors know, when a company IPO’s, the shareholders prior to the IPO make a large profit at that time.
– Exchanges themselves make money from their operations. But the members or seatholders also make a lot of money as well.
– Membership owners & seatholders of the world’s stock exchanges make money from each transaction on the exchange they are a member or a seat holder of. For each exchange there is a limited number of memberships/seats, which are usually owned by wealthy individuals & businessmen. Usually, each seat is worth over a million US dollars (for major exchanges), but after their initial public offerings, the seat’s value increase dramatically.
So how can the individual investor profit from all this?
– By a seat or membership from an individual or who owns one. Not possible for many individuals.
– Buy shares in a stock/commodity exchange that is already public, and actively expanding. See the list below of public exchanges. Crunch some numbers and see if they are quality companies, trading at attractive prices.
– Buy shares in a mutual fund that invests heavily in stock/commodity exchanges. I will comment on this below.
Major publicly traded exchanges [North America]:
– InterContinentalExchange Inc [ICE]
(ICE Futures US/Can/Europe, Russell index, etc.)
– CME Group Inc [CME]
(Chicago Mercantile Exchange, Board Of Trade of City of Chicago, etc.)
– TMX Group Inc [X]
(TSX, TSX Venture, Montreal Exchange, Natural Gas Exchange, etc.)
– NYSE Euronext [NYX]
(NYSE, AMEX, Euronext, NYSE Alternext, etc.)
– New York Mercantile Exchange [NMX]
(NYMEX, COMEX, CAREX, etc.)
– Nasdaq OMX Group [NDAQ]
(Nasdaq, OMX AB, etc.)
These exchanges, and what they do, warrant a future article themselves.
Other globally traded exchanges [Not available to majority of brokerages]:
– Hong Kong Exchanges and Clearing Limited [HKG:0388]
– London Stock Exchange Plc [LON:LSE]
There are more but I’m not going to list them all, as they are generally unavailable to many discount brokerages in North America.
One mutual fund that is particularly interesting is the Caldwell Growth Opportunity Trust. The fund invests specifically in stock & commodity exchanges around the world. They are purchasing shares on the market of publicly traded exchanges. But more interestingly, they are also purchasing the limited number of memberships & seats, from the individuals & businessmen who own them, before the exchanges go public. And as I said before, IPO’s are when the shareholders, members, & seat holders prior to the IPO, make the most money. You can bet that they have profited from the all the global exchange activity and increasing trend. It is likely that the company and their investors will profit as well. However, the minimum investment in the fund is $50,000, which leaves a lot of investors out.
As always, I recommend doing more research & calculations, before making any investments. And it is a given that I recommend individuals to gain enough financial education/knowledge first, in order to be able to make wise investment decisions.
Thanks & Happy Investing!
The Investment Blogger
Let me know if you liked this article, or if there is something you want me to write about next time.