Did Mr. Buffett Really Want the NYSE Euronext (NYX)?

If Mr. Buffett is interested in the exchange business, it is probably an industry that investors want to have on their radar screen.  This deal will continue to consolidate the industry into the hands of Intercontinental and CME Group, as well as a group of major international players that include Deutsche Borse.  The net result will be better pricing for the surviving companies’ products and improved profits for shareholders.

Despite low current market volatility, with the CBOE Volatility Index sitting around 15 recently, eventually central banks will reverse their actions that have put a clamp on volatility levels and led to rising global equity markets.  At that point, derivatives trading activity will likely continue on an upward trajectory, as participants continue to use the markets to hedge or enhance their securities’ positions.  With strong excess cash flows and an enviable operating margin around 60% for both Intercontinental and CME Group, these two leaders dominate the industry and are positioned for long-term growth.  They should be on investors’ watch lists.

The article Did Mr. Buffett Really Want the NYSE? originally appeared on Fool.com and is written by Robert Hanley.

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