The deal, hatched by Nasdaq management with the help of the owners of the Borse Dubai is one that only a schizophrenic could understand.

Dubai will buy slightly less than 20% of The Nasdaq Stock Exchange (NDAQ) Nasdaq will own a piece of Dubai, and the Middle East exchange there will be re-branded with the Nasdaq name.

Instead of competing to buy the Swedish OMX, Dubai and Nasdaq will cooperation so that the US exchange gets the prize. Dubai and Nasdaq had been competing for the OMX. According to The Wall Street Journal "The three-way deal will create an exchange group with business that stretches through three regions: the U.S., Europe and the Middle East."

And, Dubai will buy most of the Nasdaq ownership of the London Stock Exchange. NDAQ picked up 31% of the British exchange as part of an unsuccessful takeover.

The question now is how such an unwieldy organization can operate.

The deal is a desperate deal hatched by a desperate Nasdaq management. After NYSE Euronext (NYX) built a transatlantic trading powerhouse, Nasdaq was left to play catch-up. It tried to buy the London Stock Exchange several times. The Brits would have none of it, and Nasdaq ended up with a 31% interest in London. At least it has been able to unload most of that to Dubai. What they will do with a minority interest in a UK exchange is anyone’s guess.

The question now is how the new interlocking set of exchanges will be managed. There is no reason to believe that they will not have competing interests. Whether companies listed on Nasdaq will care about how the deal is structured is unclear. Whether Dubai will want to try to buy the balance of London, which would put it into competition with Nasdaq in Europe, is another.

It is, in short, a disaster waiting to happen.

Douglas A. McIntyre

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