Tuesday, October 21, 2008

Shake-up at Deutsche Borse

Kurt Viermetz has resigned as chairman of the board of Deutsche Boerse AG, effective December 8.

Deutsche Borse owns the Frankfurt stock exchange, Clearstream (a settlement operation), Eurex (the dominant force in European equity derivatives), and Eurex Clearing.

Viermetz has been its chairman for just three years, and although it isn't clear just what happened behind the scenes leading to his departure, the folks who put him there seem to have lost faith in him.

The hedge funds Atticus Capital and TCI were instrumental in Viermetz' rise to the chairmanship three years ago. The best guess at this point is that they expected him to initiate a buyback of the company's equity by this point. He has resisted doing so, and now he's out.

Atticus reacted quickly to the news: "Atticus is pleased by Mr. Viermetz's decision to resign from the supervisory board of Deutsche Boerse AG, which we believe is in the best interests of the company and its shareholders," it said in a statement this weekend. "We wish to recognize and thank Mr. Viermetz for his years of service on the supervisory board."

To those of us who don't happen to own DB stock, the issue of whether the company is to initiate a buyback may seem a rather trivial one. An operational issue is also under discussion there, though: whether the company should spin off some of its units.

From the point of view of the stock or derivatives investing publics, is it better to deal through an exchange that is separate from the clearing/settlement operation, or with a single integrated company that performs both functions? Should we be hoping that whatever shake-up underway at DB results in a break-up?

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