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NYSE Merger Likely to Have Cultural Challenges

The merger deal between NYSE Euronext and Deutsche Boerse, creating the world's largest exchange operator, is likely to have multiple cultural challenges, Rodgin Cohen, senior chairman Sullivan & Cromwell, told CNBC on Tuesday.

Rodgin Cohen
Rodgin Cohen

"Culture is a word in mergers, which is overused and under-appreciated," Cohen said, adding, "culture can be within borders, as well as cross-borders."

But given the financial environment, transactions like this make sense, he added.

"Standing still in the financial services industry in this environment is no answer, in fact, it's the wrong answer," Cohen said.

There has been speculation among people in the exchange industry that a potential interloper, coming in as a hostile, may be a real possibility in the NYSE Euronext Deutsche Boerse deal.

"The New York Stock Exchange is an icon, but at the end of the day buyers don't buy icons unless they are interested in sports teams. What they do is make a purchase—a hostile—if it makes economic sense," he said.

On another note, one item that investors should pay attention to, according to Cohen, is the Durbin Amendment. It gave the Federal Reserve regulatory power over the interchange fees banks charge business owners every time their debit card is used in stores—an amendment to the Dodd-Frank Bill to reform the banking industry.

"As implemented by the Fed in its proposed rules, [the Durbin Amendment] sharply reduced debit interchange fees, we're talking about a 75- to 80- percent reduction. That could be great for the retail merchants, we're talking a 12 billion dollar number, which moves from the banks to the merchants," he said.

But, a number of people believe that the legislative process was "so truncated—no hearings, no debate, no House vote—that the real answer is to extend the period for implementation by at least on year," Cohen added.

"There was an assumption that the nation's smallest banks and credit unions would be basically exempt, but they recognize there's only going to be one pricing, so they are vociferous in there opposition. Nobody studied the impact on the smaller banks because everyone thought they were exempt," he said.

"They aren't, not as a pragmatic matter. It will hurt," Cohen concluded.

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