Increased competition in the stock exchange industry, exacerbated by technological advancements, has motivated many exchanges to engage in mergers and acquisitions as a strategic choice for stemming the competition tide. We examine the stock and product markets effects of financial exchange mergers and find among others that shareholders of competing exchanges from the same geographical region and competitors at the same stage of development realize significantly positive abnormal returns as those involved in the merger. We also find that the merging exchanges increase their market share and experience significant reductions in bid-ask spreads at the expense of rival exchanges.