Mobile marketplaces - Consequences of the changing governance of European stock exchanges

Deregulation and increasing cross-border competition in the financial industry are affecting not only firms but also those organisations that provide markets, i.e., stock exchanges. The process of changing governance structures is exemplified in this paper by the case of Deutsche Borse AG, the Frankfurt-based main German stock exchange. The paper focuses on the reasons for relocations of national stock exchanges, and possible consequences for local firms. Secondary trading is based mainly on the exchange of (price) information, so traders were able to move away from the Frankfurt floor quite easily. However, many of them gathered together in London because of the knowledge-intensive communications between them, e.g., interpretations of rumours, market mood, etc. On the other hand, the primary markets-firms issuing new shares-are also based on the exchange of tacit knowledge. With two spatially separated groups of users, traders in London in the secondary markets and firms in Germany in the primary market, Deutsche Borse faces a "user-producer interface dilemma." Thus, a possible relocation of executive functions to London combined with the complex interplay between information and knowledge exchange in financial markets could have negative consequences for the financing conditions of local firms.