(Bloomberg News) The New York Stock Exchange, the symbol of American capitalism for more than a century, may merge with a German rival after losing ground to smaller competitors.

NYSE Euronext, the owner of the NYSE, is negotiating to be acquired by Deutsche Boerse AG with equity valued at $10 billion after its market share dwindled to 23% from 80% in the past six years. The new company will be the biggest exchange owner, handling equities worth $15 trillion and 40% of the U.S. options market.

The 219-year-old exchange led by Chief Executive Officer Duncan Niederauer, home to General Electric Co. and Ford Motor Co., was diminished as regulators opened U.S. markets to more competition after investors demanded lower trading costs. The sale to 18-year-old Deutsche Boerse in Frankfurt shows the increasing importance of machines over humans in trading stocks and the rising influence of derivatives, where profit margins are as high as 55%.

"Sadly, the NYSE became a victim of its own success-too large and dominant to move quickly to adapt," said Peter Kenny, a managing director in institutional sales at Knight Equity Markets LP in Jersey City, N.J., who became a member in 1987. "It is not all bad, but it is very sad to an old timer like myself."

Deutsche Boerse and NYSE Euronext announced merger talks on the same day that London Stock Exchange Group Plc agreed to purchase Toronto-based TMX Group Inc. for about $3.1 billion.

Exchange Mergers

The biggest day ever for exchange mergers triggered rallies in shares of operators from New York to Chicago and Sao Paulo. Nasdaq OMX Group Inc., IntercontinentalExchange Inc., CBOE Holdings Inc. and BM&FBovespa SA-all of which run derivative venues for futures or options-rallied as much as 6.7% yesterday.

Deutsche Boerse rose 3.7% to 60.60 euros as of 5:23 p.m. in Frankfurt. NYSE Euronext shares slipped 1.3% to $37.59, paring a 14% rally yesterday. Their total market value of $26 billion exceeded Hong Kong Exchanges & Clearing Ltd.'s, currently the world's largest by market capitalization.

"We are still waiting for more details and are flying a bit blind right now," said Timothy Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, N.Y., which manages $2 billion. "But the market likes the combination of cross-board stock exchanges."

Fragmented Markets