(FORTUNE Magazine) - What's driving the stock exchange merger binge?

In mid-May, Nasdaq upped its stake in the surging London Stock Exchange to 25.1%. Three days later, the NYSE bid $10.2 billion for Euronext of Paris. So why the arms race now?

1 Did the economics of exchanges suddenly change?

Yes and no. The once-clubby world has been slouching toward revolution for years because of computerized trading, which generates lower fees per trade and makes trading across borders easier--both of which point toward consolidation. When the NYSE (Research) finalized its acquisition of electronic market Archipelago and went public in March, the race to dominate trading globally was on.

2 What is the NYSE's interest in Europe? Now that it's a public company, the NYSE has to grow like one. While it maintains its lead in listed stocks (its $14 trillion total market cap is triple the nearest competitor's), the NYSE has only a 10% share of U.S. derivatives trading. But Euronext (Research) trades about 40% of Europe's $16 trillion outstanding derivatives, the world's biggest market.

3 And why doesNasdaq (Research) like London? Chalk it up in part to Sarbanes-Oxley. As it got harder to go public in the U.S. (a key source of exchange revenue), many companies went to London. Nasdaq's share of new listings at major exchanges in 2005 was 5.1%, vs. the LSE's 23%.

4 Will mergers make trading cheaper? Unclear. It may, if big-volume markets keep driving down per-trade fees. But if merging goes too far, you could face monopoly prices.