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NASDAQ Building Relationships in China (revised)

NDAQ CME

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Expanding its presence, NASDAQ OMX Group Inc. (NDAQ - Analyst Report) recently announced a Memorandum of Understanding (MoU) with Dalian Commodity Exchange (DCE), in Dalian, China. The MoU follows the establishment of the collaboration in order to look for enhanced business opportunities in the region.

Founded in 1993, DCE is the only futures exchange in Northeast China, while it ranked 15th among the leading global derivative exchanges in 2011. It is also one of the four exchanges under the supervision and administration of the China Securities Regulatory Commission.

Meanwhile, both NASDAQ and DCE’s decision to join forces is based on improving the technological initiatives in the region. This strategic alliance will also pave way for new innovative techniques to provide greater investment opportunities in these exchanges.

Additionally, both the exchanges aim to enhance the scope of exchange business by strengthening the price risk tools along with sharing information as well as upgrading technology and consulting services for mutual benefits. These efforts will help NASDAQ improve its operating leverage and create new revenue sources in the long run.

NASDAQ has been vigorously focusing on expanding its business profile through expansion into international markets in an attempt to counter the competitive forces and gain dynamism. The company’s strategic efforts to enhance fraying market position are also crucial since the recent reforms in the US has led arch-rivals in the derivatives space such as NYSE Euronext Inc. and CME Group Inc. (CME - Analyst Report) to seek greener pastures in the emerging and rapidly developing economies. This leaves no reason for NASDAQ to lag behind the market moves.

However, this is not the first time that NASDAQ has looked to gain a strong foothold in international markets.  Lately, the company purchased NOS Clearing ASA and disclosed its plan to build a new interest rate derivative trading platform in London – known as NLX – by early 2013, thereby expanding its presence in the European markets. NASDAQ also has a fair presence in the Middle East through its collaboration with the Dubai bourse.

NASDAQ carries a Zacks Rank #3 that implies a short-term Hold rating, while the long-term recommendation stands at Neutral.

(We are reissuing this article to correct a mistake. The original article, issued Wednesday, October 17, 2012, is no longer to be relied upon.)

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